Structural reforms more important than growth in China: ADB

Steady consumption and rising external demand will support economic growth in China this year, especially if the government continues its accommodating macroeconomic policy package, the Asian Development Bank (ADB) said in Beijing on Thursday.

According to the Asian Development Outlook 2014, ADB's annual publication, its growth forecast for China's gross domestic product (GDP) was unchanged at 7.5 percent in 2014 and 7.4 percent in 2015.

"At this critical juncture in China's transition, carrying out the government's announced structural reforms is more important than meeting the growth target," said ADB's chief economist Shang-Jin Wei.

"Even if the growth rate falls somewhat below the predicted rate, as long as the employment situation is healthy, there is no need for panic."

China's GDP growth moderated from 7.7 percent year on year in the fourth quarter of 2013 to 7.4 percent in the first quarter of 2014, dragged down by fiscal tightening, weak export growth and decelerating real estate investment.

Growth picked up to 7.5 percent in the second quarter of 2014 as the government accelerated spending on infrastructure and social housing and introduced targeted monetary easing.

Jurgen Conrad, head of Economics Unit of ADB's China office, said that though several key activity indicators weakened in the third quarter, China's economy is still on the track for steady growth. He said in September there have been sings of rebound in figures including the Purchase Management Index (PMI) which slid a bit in August.

The principal domestic risks to the forecast stem from uncertainty over the government's ability to control an ongoing correction in the real estate sector and avoid a rapid buildup of fiscal and financial strains, the report said.

The report noted that in a positive sign for long-term sustainable growth, the Chinese government has made progresses on its reform agenda, like development of the regulatory framework for the Shanghai free trade zone, doubling the daily trading band of the Renminbi and opening a new window for capital transfers by connecting the stock exchanges of Shanghai and Hong Kong.