Jiaxing-Shaoxing River-Crossing Bridge, Hangzhou-Ningbo Expressway and Shangyu-Sanmen Expressway get crossed at Guzhu in Shangyu, east China's Zhejiang Province, on July 6, 2013

For the past two years, China's economy has slowed down. According to statistics released by the National Bureau of Statistics (NBS) on July 15, China's gross domestic product (GDP) grew by 7.6 percent in the first half of the year. In the second quarter, the GDP growth was a mere 7.5 percent, the second lowest since the fourth quarter of 2010.

But skeptics be warned: The slower growth doesn't mean you can dismiss China's economy just yet. NBS spokesman Sheng Laiyun says China's economic growth is stable and economic restructuring - that is, shifting China toward more consumption - is progressing steadily.

China is trying hard to reduce its dependence on investment and shift its economy to a growth mode that is more sustainable in the long run. Its growth rate is in line with the Central Government's expectations and plans to transform the economy.

Liu Yuanchun, Associate Dean of the School of Economics at Renmin University of China in Beijing, suggests that the harm to China's economy does not stem from a slowdown but comes from rapid growth during the restructuring phase. Therefore, the slowdown is a good thing for China's long-term plans. Skeptics should look beyond the slowdown and instead pay more attention to the government's ambitious economic reforms and restructuring.

A temporary slowdown

Statistics from the NBS show that China's agricultural output experienced a steady increase in the first half year, and food security was boosted by a summer grain harvests, 1.5-percent greater than the previous year. Industrial manufacturing saw steady growth; and corporate profits continued to increase. These figures suggest that China's economy rests on a solid foundation.

Statistics also show that during the same period, the per-capita disposable income of China's urban residents registered a nominal increase of 9.1 percent year on year and the per-capita cash income of rural residents increased 11.9 percent, a clear indication that slower growth hasn't dragged incomes down.

Lian Pingyan, chief economist at the Bank of Communications, noted that concerns over a slowdown are exaggerated because figures like the employment rate and commodity prices were normal.

Zhang Liqun, a research fellow from the Development Research Center under the State Council, China's cabinet, believes that China had entered a period of moderate economic growth, one that is moving at an appropriate pace. "China's economy is bottoming out and seeking a new balance," said Zhang.

Zhang said he is confident in the economy in both the short and long term since China is still in the midst of high-speed industrialization and urbanization.

Throes of transformation

China has been harassed by environmental pollution and resource waste during the past three decades of unbridled economic growth. Since the new government came into power in March, plans for more sustainable economic development and upgrading have assumed more focus.

As a result, plenty of red tape has been cut in a push to create more efficiency in the economy. In two meetings held in April and May, the Central Government decentralized its power and put more decision-making capability in the hands of provincial and municipal governments.

Three economists at Barclays Capital coined the term Likonomics named after Premier Li Keqiang's bold initiatives designed to maintain steady and healthy economic development, with less focus on raking in high GDP growth. Likonomics is composed of three parts - ending stimulus policies, deleveraging and structural reforms.

Pursuing the above three won't be easy, and the road to economic transformation could be a bumpy one, if it isn't already, with plenty of sacrifice that will have to be made. When the transformation finally ends, China's economy will achieve healthier and more sustainable development, says Zhang.

On June 20, the overnight interbank repo rate shot up to over 30 percent, and the overnight Shanghai Interbank Offered Rate surged 578 points to 13.44 percent, which caused a panic in the capital market. Rumors of a "cash crunch" spread far and wide, and China's stock markets slumped the next day. Unexpectedly, the People's Bank of China didn't come to the rescue, a strategic choice on its part.

As the American economy shows signs of picking up, the Federal Reserve has begun to shake off quantitative easing monetary policies, and the world economy is speeding up its deleveraging. The central bank's refusal to infuse more money into the banking system brings an end to expansionary monetary policies.

In fact, the Central Government has laid emphasis on steady credit growth for the real economy. Recently, Premier Li has reiterated "activating the stock of money and credit," implying an intention to cease the use of expansionary monetary policies.

Although the transformation underway has led to slower growth, the government has no intention of changing course. On July 9, at an economic symposium in Guangxi Zhuang Autonomous Region, Li said, "Macro-control should focus on the pursuit of long-term benefits and ensure the economy is fluctuating within a reasonable range. That is to say, indexes like the economic growth rate and the employment rate shouldn't break the bottom line, and price rises shouldn't exceed the upper limit."

Although Li didn't offer specifics, experts say his "bottom line" refers to a minimum of 7.5-percent annual economic growth and at least 9 million new jobs for rural and urban residents. His "upper limit" refers to no more than a 3.5-percent rise in the Consumer Price Index (CPI) this year, as laid out in former Premier Wen Jiabao's government work report in March.

At present, employment and consumer prices are stable. Statistics from the Ministry of Human Resources and Social Security showed the market had 107 jobs for every 100 job hunters in the second quarter, slightly lower than the 110 jobs in the first quarter. According to statistics from the NBS, the CPI rose 2.7 percent year on year.

There are concerns over whether China's economy can stay above the "bottom line," since the 7.6-percent growth in the first half of this year is very close to it. Zhang Monan, an associate researcher with the Economic Forecast Department of the State Information Center, suggests the "bottom line" indicates the government is more tolerant of a slowdown.

"Some people may ask whether the new government can help keep China's economy above the 'bottom line.' It's difficult to give an answer. But one thing is for sure: Reform means pain," said Zhang Monan.

Guan Qingyou, Deputy Director of Minsheng Securities Research Institute, argued that China should maintain its "bottom line" well into the future. "It's of significance to stabilizing growth during economic transformation."