China economy showing clear signs of stabilization

China's economy is showing clear signs of stabilization on track to meet the government's 2013 growth target of 7.5 percent.

According to Ministry of Commerce, Foreign Direct Investment (FDI) to China in July reached 9.4 billion U.S. dollars, up 24.13 percent year on year, as China attracted a total of 71.39 billion U.S. dollars in the first seven months of the year, up 7.09 percent from the same period last year.

The service sector saw a steady increase of FDI inflows in the period, up 15.78 percent year on year, while manufacturing sector dropped by 2.4 percent.

Purchasing Managers Index (PMI) rose to 50.3 percent in July, up 0.2 percent from June, according to Sheng Laiyun, spokesman of NBS. Industrial added value increased 9.7 percent year on year, with the growth rate up 0.8 percentage points from June.

Starting from July, the industrial production has increased, while foreign trading volume exceeded expectations and domestic demand further solidified, according to Ken Peng, a senior China economist with BNP Paribas, who added that all these factors have contributed to a robust economic growth.

China.s economic growth stabilizes as it is undergoing structural adjustment.

In the past 10 years, the ratio of agricultural labors in total population has decreased by one third, and agricultural production took only 26 percent in total GDP in 2012. However, since last year, the service sector has surpassed industrial sector in terms of growth rate.

Beijing has shown willingness to tolerate slower growth amid efforts to reform its economic growth model to reduce pollution, social inequity and over-reliance on debt-financed construction and exports.

Sheng, spokesman of NBS, said it was very difficult for China to maintain a fast growth rate due to structural adjustments and declining surplus labor, but rising consumption, increasing urbanization and catch-up growth in less developed regions will be long-term economic drivers.

The Chinese government has unveiled a number of policies to cope with downward pressure and has created room for further economic rebalancing efforts, Sheng said, including scrapping taxes for small firms, offering more help for ailing exporters and accelerating investment in urban infrastructure and railways.

"I do have confidence in China's economy," Sheng added.

Amid concerns that local government debt could derail economic growth, Sheng expressed his confidence in China's dealing with this issue.

An audit conducted by the National Audit Office (NAO) found that local government debt totaled 10.7 trillion yuan at the end of 2010, more than 26 percent of GDP.

In early June this year, the NAO said a follow-up audit found total debt owned by 36 local governments by the end of 2012, up 12.9 percent from 2010.

The Chinese government has created many policies to regulate this area in recent years and the NAO has started a nationwide audit of government-related debt.

Experts belive with solid implementation of the policies and further efforts from the governments, the debt problem will be brought under control not for long.