The 7.4 percent annual GDP growth is reasonable. Therefore, provided mild fiscal stimulus is maintained the 7.5 percent GDP target for 2014 should be achieved. The danger would be allowing further deceleration.

The external environment for China remains negative. There has been no increase in total import volumes by advanced economies for three years. US total imports actually fell last year. The external improvement in 2014 is likely to be limited. Therefore the overwhelming majority of China`s growth must come from domestic demand.

Domestically the chief immediate problem is rising interest rates putting downward pressure on investment. Growth of fixed asset investment fell from 20.9 percent in March 2013 to 17.6 percent in March 2014. Decline in increase in retail sales was only marginal from 12.6 percent to 12.2 percent. So the chief cause of the slowdown is the fall in investment growth.

The investment fall is an inevitable result of China`s long term interest rates rising 1.1 percent in the same period. Interest rate rises reflect that downward pressure on company profitability has decreased the supply of capital – technically put, China`s savings rate has fallen.

The immediate priority is therefore to maintain investment by fiscal measures – the recent small stimulus package correctly focused on investment. The intermediate term priority is to re-raise company profitability.

(罗思义为中国人民大学重阳金融研究院高级研究员，来源：中国日报 欢迎关注人大重阳新浪微博：@人大重阳 ，微信公众号：rdcy2013)

      点击阅读中文译文