Some of China’s provincial-level regions recently lowered their GDP growth expectations for 2019， arousing public concern. However， although the Chinese economy is facing increasing downward pressure， as confirmed by the Central Economic Work Conference held in December 2018， China still has sound economic fundamentals. The economy still has strong internal growth drivers， with new positive factors arising， according to the work conference.
　　In fact， China’s GDP growth speed complies with economic rules. Industry-wise， the share of the service sector in the total GDP has been rising in recent years， while its productivity is generally lower than the manufacturing industry.
　　As for the external environment， the global economic recovery that started in 2016 has almost ended and trade protectionism is growing. For example， the Baltic Dry Index， a barometer of the global shipping industry， has dropped to the lowest level in the past two years.
　　On the other hand， as the Chinese economy is now in a critical stage of preempting and defusing major risks and achieving high-quality development， some of the policies frequently used before—such as intensifying infrastructure investment and relaxing real estate control—have become less effective.
　　However， there are new positive factors， including support from the economic fundamentals and room for policy changes， giving the economy strong internal momentum for continued growth.
　　First， the external environment has not completely deteriorated. With the U.S. economy showing an increasing tendency to peak， the Federal Reserve is tapping the brakes on interest rate hikes and is likely to reverse in the opposite direction. Thus， capital is flowing back from developed economies to emerging economies again.
　　For China， as the U.S. interest rate hike ends and the renminbi exchange rate becomes stable， the conditions for monetary easing will mature. On the other hand， the market demand from emerging economies is recovering， which will help China offset a decline of exports to developed economies.
　　Second， China’s economic fundamentals are still sound. After 40 years of rapid growth， the economy has achieved significant progress in size， depth and resilience. China has the world’s most potential consumer market， its per-capita GDP is reaching $10，000， and the middle-income population has surpassed 400 million. All these are essential to cope with changes in the external environment. 　　China has a complete industrial system， the proportion of hi-tech industry is rising， and new growth drivers are being added. A large pool of skilled workers is also an important part of its competitive edge. In addition， there is a great deal of space for investment， with considerable opportunities in new-type infrastructure， public service facilities and environmental protection.
　　Finally， counter-cyclical adjustments are increasing. The Central Economic Work Conference remarkably intensifi ed efforts to ensure stable growth， and various counter-cyclical adjustment measures have been put in place.
　　For instance， the Central Government has issued transfer payment quotas of more than 1.8 trillion yuan （$265.88 billion） and allowed local governments to issue an additional 1.39 trillion yuan （$205.32 billion） in bonds.
　　It is expected that the defi cit rate target and the annual quotas for local government debt issuance to be approved at the upcoming annual session of the National People’s Congress， the national legislature， will be higher than in previous years.
　　Due to external uncertainties， it is hard to project how China’s exports will fare in the future. In the domestic market， as real estate control has not been relaxed and the leverage ratio of residents is dipping， both investment and sale in the real estate sector are likely to slow down this year. However， all these factors are under government attention， so they will not cause unexpected negative impacts.
　　Despite the complex external environment and increasing diffi culties and more downward pressure， China’s economic fundamentals still have potential， and policies are being readjusted. As all these become effective， the economy will hopefully see improvement in the third quarter and operate within a reasonable range throughout the year.