Fast Growth, High Efficiency and Low Inflation Feature China's Economy

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Last updated at: (Beijing Time) Friday, November 30, 2001

Fast Growth, High Efficiency and Low Inflation Feature China's Economy

China has achieved a good beginning in carrying out the blueprint of the "10th Five-year Plan", as evidenced by the new, noticeable achievements in economic construction: a 7.3 percent GDP growth over the previous year is expected this year, it is entirely possible to reach the economic growth target set early this year.
Beijing's success in its bid for hosting the 2008 Olympic Games, the successful convocation of the APEC Conference in Shanghai, China's upcoming accession to the World Trade Organization (WTO) and other major events have attracted the attention of the world people who hail the good momentum of China's economic development.

In 2001, the pace of the three major economies of the United States, Japan and European Union (EU) has further slowed down, the world economic development has encountered difficulties unprecedented in the past 20 years.

In the year soon to be over, hundreds of millions of Chinese people, under the leadership of the Communist Party of China (CPC), are taking firm step in overcoming various difficulties, and through their hard work, have achieved a good beginning in carrying out the blueprint of the "10th Five-year Plan", as evidenced by the new, noticeable achievements in economic construction: a 7.3 percent GDP growth over the previous year is expected this year, it is entirely possible to reach the economic growth target set early this year.

Beijing's success in its bid for hosting the 2008 Olympic Games, the successful convocation of the APEC Conference in Shanghai, China's upcoming accession to the World Trade Organization (WTO) and other major events have attracted the attention of the world people who hail the good momentum of China's economic development. In the complicated and changeable external environment, we have persisted in the principle of expanding domestic demands, implemented the pro-active fiscal policy and a robust monetary policy, as a result, a situation of rapid growth has appeared in economic operation, bringing fresh vigor for world economic development.

Macro-economic Operation: Fast Growth, High Efficiency, Low Inflation

Fast growth, high efficiency and low inflation are the striking features in the operation of China's economic train in 2001.

It is noticed that this year has seen steady and rapid growth in China's macro-economic operation, presenting a sharp contrast to the notable slowdown of the world economy. According to the estimation in a recently published report of the World Bank, the growth rate of the world economy this year will only be 1.3 percent, much lower than last year's 3.8 percent.

Since the beginning of 2001, China has seen an 8.1 percent GDP growth rate in the first quarter, 7.9 percent in the first half of the year, 7.6 percent in the first three quarters, and an estimated 7.3 percent for the whole year. Compared with last year, the fluctuation range of this year's economic growth will not exceed 1 percentage point.

The steady economic growth is reflected first in the stable development of industrial and agricultural production.

Agricultural production develops amidst structural adjustment, and readjustment is made in the course of development, there has appeared a gratifying trend. In the first three quarters of the year, subjected to the dual influence of a reduction in the area sown to grain and serious drought, the output of China's summer grain and early rice has dropped by 8.5 billion kg from the previous year, but growth has been chalked up in the output of most major cash crops and animal and aquatic products, acreage sown to fine-quality special wheat has been expanded by 1.3 million hectares, the area sown to quality rice and rape has also been greatly enlarged.

It is worth mentioning that under the action of policy guidance and market demand, a situation of regional concentration has appeared in the production of China's main agricultural products. The main producing area of wheat is concentrated in the northern region, particularly in the Yellow River basin; an oil-bearing crop production layout has been formed like this: rape in the Yangtze River valley, peanut in the Yellow, Huaihe and Haihe regions, and soybean in the northeast region; a three major cotton producing areas has been gradually formed in Xinjiang, the Yangtze River valley and the Yellow River valley.

Industrial production is undergoing main structural readjustment. Industries on a nationwide scale registered 1,959.7 billion yuan worth of added value in the first three quarters, a 10.3 percent increase over the same period last year. The output of products with a relatively high technological content was growing at high speed.

When the world information industry is being plagued by loss and reduction in the number of staff, China's information industry is keeping a strong growth trend, becoming an important force for the development of the world information industry. In July this year, the number of mobile phone users reached 120.6 million, surpassing the United States to become the world's number one mobile communication country. The number of net surfers has hit 26 million in China, far higher than the world average growth. The information industrial bases of the Asia-Pacific region are being extended from Tokyo, Seoul and other cities and shifted to China's Beijing, Tianjin, Shanghai and the Pearl River Delta.

Traditional industrial sectors are also doing well amid structural readjustment. Since the beginning of this year, implementation of the measures of closing down and suspending production in five small industrial enterprises has led to effective improvement in the environment for the operation of some key industries and major State-owned enterprises. The end of deficits made by coal industry long been in production and operation difficulties has become a foregone conclusion, the whole industry enjoys both brisk purchase and sale and a rapid growth in exports. It is estimated that the export of coal is expected to top 80 million tons this year, making China the world second largest coal exporter. The end made by the coal industry as a whole this year indicates the reversal of deficits made by all traditional industries of China.

Coastal regions, as the forerunners in China's reform and opening up endeavor, remain the "bright points" of regional economic growth this year. Despite the influence of the downturn of the world economy, although the export achievements of Guangdong Province, whose economic aggregate ranks first in the country, were undesirable, its economy continued to maintain a 9.6 percent growth in the first three quarters of the year, and economic growth for the whole year is expected to reach 9.5 percent.

The various economic indexes of Zhejiang Province have soared as a whole. Its industrial economy has assumed a good operational pattern characterized by the growth rate of efficiency outdoing the growth rate of sales, and the growth rate of sales outstripping the growth rate of production. Export trade has also been booming. From January to August, exports saw a sharp increase of 21.5 percent, higher than the national average of 13.9 percentage point, with the growth rate topping all major export provinces and cities of the country.

In the various western provinces undergoing large-scale development, key projects have started construction one after another. After construction of the Qinghai-Tibet Railway started, the great army of railway builders have stepped up construction in the "Roof of the World"; the plan of pipelining natural gas from the west to the east and west-to-east electricity transmission is being turned into reality; major progress has been achieved in returning reclaimed land to forests and grassland.

Unprecedented speed has been created in the investment growth and economic growth in western regions. In the first three quarters of the year, 12 western provinces (municipalities and autonomous regions) chalked up 1207.994 billion yuan worth of GDP, an 8.7 percent growth over the same period last year, or 1.1 percentage points higher than the national average.

Significant progress has been made in the structural readjustment in agricultural provinces in the central region. This year sees a dramatic increase in the area sown to quality wheat nationwide, concentrated mainly in the central region. Due to price hikes of grain and increase in quality agricultural produce, farmers' income from the sales of agricultural products has witnessed fairly big increase. In the first three quarters this year, cash income of Henan farmers chalked up a 9.1 percent increase. There has been a pickup in the prices of grain, cotton, tobacco and other major farm products, which has brought about a notable change in the situation of farmers' family business income. Judged from the situation in the 11 major grain producing provinces, in the first three quarters of the year, the growth rate of rural residents' cash income was higher than the national average growth by 0.6 percentage point.

As China's economic train speeds forward, its quality and efficiency of operation have also been improved. The profits reaped by the nation's industrial enterprises in the first three quarters of the year totaled 326 billion yuan, a 12.6 percent increase, of which State-owned and State holding enterprises had an 8.4 percent increase. According to the estimation of the State Administration of Taxation, financial revenue this year will increase by over 200 billion yuan, about a 16 percent rise. Of which, Value Added Tax (VAT), consumption tax, enterprise and individual income tax, as well as the VAT and consumption tax levied by the customs house on a commission basis will also see a fairly big increase.

Statistics show that China's market prices are basically stable, between January and October, the general level of consumer price was up by 0.9 percent over the same period last year, while the price index of the means of production between January and August was down by 1 percent from the same period last year. Inflation will not become the main issue of the present macro-economy.

On October 18 this year, China's foreign exchange reserves exceeded US$200 billion. China's maintenance of adequate foreign exchange reserves is conducive to enhancing China's reputation, promoting opening wider to the outside world and maintaining the stability of the exchange rate of Renminbi (People's Currency).

With implementation of the "10th Five-year Plan" started, China's comprehensive national strength has gone further to a new stage. The good beginning of the national economic construction has laid a solid foundation for economic development in the coming year.

Three Driving Forces for the Economy: Export Growth Decline, Rapid Investment Rise, Steady Consumption Increase. In 2001, the manifestations of these three motive forces boosting China's economic growth are as follows: high export followed by low export, rapid rise of investment and steady growth of consumption.

The Guangzhou National Commodity Fair has always been the "barometer" of China's foreign trade export. The Guangzhou Commodity Fair this spring saw the gathering of foreign business people and the achievement of remarkable success. But the Guangzhou Commodity Fair held this October was not as lively as the spring one; the number of clients attending the fair dropped by 10 percent, and that of US business people decreased by 25 percent, those from the Middle East region fell by more than 50 percent; the business volume of export fell by 15.4 percent, of which the volume of transaction with the United States decreased by 22 percent compared with the previous Fair, that with eight Gulf countries by 55 percent. Change in the two Guangzhou Commodity Fairs this year is a direct reflection of the downturn of the world economy, especially the impact of the "September 11" incident on the development of China's foreign trade.

After the first quarter, the growth rate of China's export trade took a downturn trend, falling from high to low. Statistics indicate export increased 14.7 percent. the figure decreased to 8.8 percent in the first half of the year, export saw respective increases of 6.6 percent and 0.9 percent respectively in July and August, it is estimated that an increase of about 4 percent will be recorded for the whole year.

People can remember that China saw an unusual 27.8 percent growth in its exports last year. So, this year's export took off on the basis of last year's high base number. There are normal factors for the decline in the growth rate of this year's export on a quarterly basis, but the more important reason is due to the US economic downturn, and the general depression of the world economy. US economic scale and imports and exports account for about one quarter of the world's total. The slowdown of US economic development is bound to retard the speed of the world economic development, leading to the further shrinking of international market demand. Over the past 20-plus years of reform and opening up, the external dependence of China's economy has topped 40 percent. Decline in export trade not only retards China's economic growth, but also adversely affects employment and taxation.

Beginning from the mid-year, China adopted a series of measures to expand exports and reduce the pace of export decline, so it is none too easy to keep the growth of export at around a 4 percent rate.

As a large developing country, China's huge domestic demand remains the greatest advantage of China's economic development. Under the adverse external environment, investment and consumption play an important role in boosting this year's economic growth.

This year has seen the fastest growth in fixed asset investment. Statistics show that between January and October this year, State-owned and other economic sectors made investments of 1,842.4 billion yuan, a 17.4 percent increase over the same period of the previous year. It is estimated that fixed asset investment of the whole society will increase by 12 percent, approximately 3 percentage points higher than that of last year, and its contribution to economic growth will be 0.5 percentage point higher than that of last year. Of which, investment in real estate and in western regions has a fast growth, investments in these two sectors reached 31.2 percent and 22.8 percent respectively in the first 10 months.

China's growing economy has attracted the influx of foreign capital. Between January and October this year, China newly approved 20,549 foreign enterprises, a 17.47 percent increase over the previous year, paid-in foreign capital hit US$37.253 billion, an 18.63 percent increase over the same period last year. This means that there is an average of US$100 million of direct foreign investment made every day in China. A survey indicates that of the regional headquarters and representative offices of more than 3,000 Hong Kong-based transnational companies , nearly half have planned to increase their investment in the Chinese mainland. Recently, Dell Company, a computer manufacturer, decided to move its factory from Southeast Asia to China. Motorola has closed its European-American factory, but increase its investment in China. Coca Cola Company has decided to invest US$150 million to build six more factories in China in the next five years.

In the opinion of some Chinese and foreign experts, under the circumstance of continued world economic slump, China enjoys political stability, sustained, rapid economic growth, China's huge market potential has had an ever-stronger appeal to foreign countries and the regions of Hong Kong, Macao and Taiwan, these, plus China's impending accession to the WTO as well as Beijing's success in its bid for hosting the 2008 Olympic Games and other factors, have caused foreign investors in general to have favorable expectations of China's economy. In recent years, China has revised some laws and regulations relating to foreign investment, abolished some restrictive measures on foreign investment and promulgated preferential policies encouraging foreign investment in China's western regions, and has thus bringing about growth in foreign investment.

With the beginning of the new century, the Chinese people have, as a whole, lived a relatively comfortable life, major changes have taken place in urban residents' consumption structure. Commodities such as cars and houses worth more than 100,000 yuan each are becoming the hot spots of this year's consumer market. In the first 10 months of this year, China sold a total of 1,957,200 cars, a 16.68 percent increase over the same period last year. Since the beginning of this year, due to the further progress in the reform of the housing system and the improvement in housing credit, plus the promotion of such factors as WTO entry and the invigoration of the market, the marketing of commodity houses had all along remained in the state of rapid growth in the first three quarters. The growth rate of the sales of commodity houses exceeded 30 percent in the first three quarters of the year. Tourism and education consumption was also warming up. Statistics show that between January and September, the number of tourists to China grew by 5.78 percent over the corresponding period last year. The country's foreign exchange earnings from tourism increased by 9.28 percent over the same period last year. During the "October 1 Golden Week", China chalked up a tourist income of 24.98 billion yuan, an 8.6 percent rise over the same period last year.

On the basis of a relatively high base number of the total volume of retail sales of consumer goods last year, the volume of retail sales of consumer goods in the first 10 months of this year still increased 10.1 percent. According to an analysis, the contribution made by the growth of China's consumption demand this year to GDP growth is approximately equal to that of last year.

Macro-economic Decision: Being Predictable, Scientific and Efficient

Since the beginning of this year, due to the synchronous slowdown in the economic development of the world's three major economies-the United States, Japan and EU, the deterioration of the international economic environment will be worse than the Asian financial crisis. The acceleration of economic globalization has added burden on many countries and regions around the world. Under such an international environment, it is really not easy for China's economy to maintain a growth rate of over 7 percent.

The fact that China's economy still maintains a rapid growth under the circumstance of a downturn of the world economy shows that China's macro-economic policy decision is predictable, scientific and efficient.

The Central Economic Work Conference held at the end of November last year, while planning this year's economic work, clearly pointed out that it was necessary to persist in solving the problems arising in the course of advance by the method of development, promptly adjust the macro-economic decision in light of the change and development of the situation and constantly improve it in practice.

The Central Working Conference held this February called on comrades of the whole Party to rally more closely around the Party Central Committee with Comrade Jiang Zemin at the core and, uphold Deng Xiaoping Theory and the Party's basic lines as the guidance and comply with the requirements of the "three represents", to get a clear understanding of the situation, grasp the general situation, make concerted efforts, do solid work in real earnest, and work hard to accelerate the reform, opening up and socialist modernization drive and to achieve the magnificent goals of the "10th Five-year Plan" for social and economic development.

The Fourth Session of the Ninth National People's Congress (NPC) held in March this year made predictable analysis and judgment on the difficulties that may be encountered in China's economic development resulting from the slowdown in international economic growth rate and inadequate domestic demands and made relevant arrangements.

The desirable performance of China's economic development this year once again proves the correctness and timeliness of implementation of the policy of expanding domestic demands.

China has implemented a macro-control policy based mainly on expanding domestic demands for four consecutive years and has achieved remarkable results since 1998. In the middle of 2000, China's economy began to take a turn for the better, the GDP growth rate was restored to 8 percent and the years-long economic declining trend was reversed, this has not only helped China shake off the adverse influence of the Asian financial crisis, but also has greatly enhanced reserve strength for further development.

On the basis of past years' practice, this year China has continued to implement the proactive fiscal policy and a robust monetary policy to boost the sustained, rapid and healthy development of the national economy.

China has continued to issue additional treasury bonds worth 150 billion yuan, which is mainly to be used in infrastructure construction, the large-scale development of the western region, technical renovation and the continuation of some projects using national bonds. National bond investment arranged for this year is budgeted at 150 billion yuan, this, plus the 50 billion yuan national bond funds carried over to this year from last year, makes usable national bond funds reach 200 billion yuan, higher than the average annual 120 billion yuan level in the previous three years. Of the 50 billion yuan national bond funds to be used for developing the projects of the western region, 20 billion yuan is arranged to be used in the first half of the year, the remaining 30 billion yuan can be put into use in the second half of the year.

In the face of the many unfavorable factors for economic development, continued efforts have been made to implement the principle based mainly on expanding domestic demands to maintain the continuity and stability of the monetary policy, we have made flexible use of a variety of money policy tools to maintain an appropriate growth in the money supply.

Increase of investment is integrated with expansion of consumption. This year, we have continued to regard the expansion of consumption as an important content of the implementation of the proactive fiscal policy, and have further increase effort for the policy of expanding consumption. First, we increased the wages for staff in organizations and institutions and pensions for retirees twice in April and October respectively. Second, central and local financial departments have dramatically increased expenditures on social security, basic pensions for enterprise retirees and basic living costs for laid-off workers from State-owned enterprises have been issued on time and in full. Third, we have tried by every possible means to increase farmers' income. We have continued to increase input in agriculture to promote management of agriculture in an industrial way, we have carried out the policy of supporting the development of leading enterprises, thus creating conditions for increasing farmers' income and opening up rural markets. In view of the serious situation of disasters this year, the State has exempted relevant agricultural tax in villages of the afflicted areas. Fourth, through the adoption of such measures as increasing input in tourist infrastructure facilities, encouraging the development of housing credit, reducing car purchasing tax and abolishing fees on the initial installation of mobile telephones, we have improved the policy of consumption and promoted consumption growth in the fields of tourism, housing, motor vehicle and telecommunications.

It is emphasized that every possible means should be tried to expand exports. To deal with the situation featuring the slowdown in the world economic and trade development and a decline in international market demands, we have persisted in the strategy of diversifying the export market, actively opened up new markets and adopted a series of measures to encourage exports and have thus achieved the anticipated results. By implementing and stabilizing the various measures including export tax refund, we have maintained the continuity and stability of policy. We have speeded up adjustment of the mix of export commodities, increased the proportion of the export of electromechanical products and enhanced international competitiveness of export. We have continued to deepen reform of the foreign trade system and foreign trade enterprises, granted production enterprises more right of import and export management and enhanced the vigor of enterprises. We have waged resolute and in-depth special struggle against the gaining of export tax refund through fraud and deception and struggle against smuggling and illegal arbitrage of foreign exchange, which have played a desirable role in improving the foreign trade environment.

For a period of time to come, fairly big uncertainty and complexity will continue to exist in international economic development. China is a large developing country with a population of nearly 1.3 billion, it is faced with a very heavy task of economic development. In the face of the complicate and changeable international situation, especially after entry into the WTO, China's economic construction will be confronted with both new opportunities and new challenges. Nevertheless, China has vast domestic markets, abundant human resources and a stable social environment. So long as we persist in the principle of expanding domestic demands, implement the proactive fiscal policy and a robust monetary policy, calmly cope with the situation and pursue the good while avoiding the harm, we will certainly be able to grasp the initiative of development in our own hands, march forward triumphantly and maintain the rapid and stable economic growth.

By People's Daily Online

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