China's slowing GDP growth within gov't tolerance

China's gross domestic product (GDP) growth slowed to 7.6 percent in January-June of 2013, the weakest first-half performance in three years, but analysts said the slower growth is above the lower limit and the cost of reform.

Amid a continuous slowdown in the world's second-largest economy, the growth was in line with market expectations and was above the government's full-year target of 7.5 percent.

"It is not necessary to be too pessimistic; the bottom line in the government's two previous five-year plans was 7 percent. We should prepare for a fairly long difficult period as that is the cost of reform," said Yu Yongding, an economist at the Chinese Academy of Social Sciences, a government think tank.

China's full-year annual growth eased to 7.8 percent last year, its weakest since 1999, due to volatile external markets and the government's domestic tightening to tame property prices and inflation.

Growth in the second quarter stood at 7.5 percent, down from 7.7 percent during the first quarter, data from the National Bureau of Statistics (NBS) showed on Monday.

"China's economy has maintained a steady growth," Sheng Laiyun, a spokesman for the NBS, said at a press conference.

According to the NBS data, GDP totaled 24.8 trillion yuan (4 trillion U.S. dollars) in the first six months.

"Major economic indicators are still within reasonable ranges as expected, but the economic environment remains complex," Sheng said, adding that the market should play a better role to bring out the economy's intrinsic vigor.

The latest GDP figures headed a string of other data.

Industrial output increased 9.3 percent year on year in the first half of 2013, while the growth of fixed-asset investment, a measure of government and private spending on infrastructure, stood at 20.1 percent during the period, down 0.8 percentage points over the first quarter of the year.

Retail sales, a key indicator of consumer spending, increased 12.7 percent from a year earlier. The growth rate picked up by 0.3 percentage points from the January-March period, according to the NBS.

Data showed that consumption contributed 45.2 percent, investment 53.9 percent and net exports 0.9 percent to first-half GDP growth.

Xu Lianzhong, an economist from the price monitoring center of the National Development and Reform Commission, said the former growth pattern that focused on investment and exports cannot be sustained, adding that reforms on the financial system and the urbanization process should be further promoted.

China's exports and imports took surprising tumbles in June. Exports dropped 3.1 percent year on year to 174.32 billion U.S. dollars, while imports declined 0.7 percent from a year earlier to 147.19 billion U.S. dollars, according to the General Administration of Customs.

"Europe is still struggling to recover from a steep downturn and the quantitative easing in the global economy will add to uncertainties," said Zhuang Jian, an economist at the Asian Development Bank.

The tourism sector felt the pain directly. For instance, cruise lines on the Yangtze River received significantly fewer tourists in the first six months.

"The number of tourists declined more than 20 percent," said Qin Xinqiao, executive deputy general manager of a cruise line based in central China's Hubei Province.

Despite the difficulties, the economic dynamics remains unchanged, said Sheng Laiyun.

Li Daokui, a former advisor to China's central bank, projected that future growth will be driven by the supply of quasi-public products such as urban infrastructure, air cleaning and water treatment.

The biggest risk China faces is not slower growth but an over-reliance on past growth models, according to Zhang Monan, a researcher with the State Information Center, a government think tank.

Premier Li Keqiang has given some suggestions on dealing with the conundrum.

"Economic operations should be managed in such a way that ensures that the growth rate, employment and other indicators don't slip below the lower limit and inflation does not exceed the upper limit. In such circumstances, the country can focus on restructuring and reform," he said in a speech delivered during an inspection tour of south China last week.

Li's speech did not define the government's limits, but some economists believe that the economy can still expand by around 7 percent without government stimulus.