Roundup: Chinese Economy Set to Grow Faster

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Last updated at: (Beijing Time) Wednesday, July 17, 2002

Roundup: Chinese Economy Set to Grow Faster

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China's economy maintained a fast growth in the first half of this year and the National Bureau of Statistics (NBS) forecasts an annual growth rate higher than the seven percent target set at the beginning of the year.

The Development Research Center (DRC) of the State Council, a think tank of the central government, recently also predicted the economy may grow 7.5 percent for the whole year, exceeding the 7.3percent growth of last year.

The DRC forecasts domestic demand will continue to grow in the latter half of the year though growth of overseas demand may slow down.

Healthy, stable and fast growth in first half year

In the first six months of the year, industrial output in China rose 11.7 percent from the corresponding period of last year. Light and heavy industries grew 12.6 percent and 19.2 percent respectively.

In the same period, the sales-output ratio of industrial products rose by 0.36 percentage points to 97.11 percent. Exports of industrial products surged 22.9 percent on an yearly basis.

On the supply side, all industrial sectors maintained a balanced growth in the first half of this year.

On the demand side, the domestic market has kept expanding while the international market improved slightly.

The growth rate of both investment and consumption kept rising for six consecutive months since the beginning of the year. Official statistics showed fixed asset investment soared 24.4 percent in the first half of the year, continuing to be the major driving force of the economy.

Meanwhile, retail sales grew 8.6 percent year-on-year to 1,944.8 billion yuan (235.2 billion US dollars) during January to June.

Exports grew faster than expected. The total value of exports surged 14.1 percent to 142.1 billion US dollars, while inflow of foreign direct investment rose 18.7 percent to 24.6 billion US dollars.

Major economic indicators showed that the economy maintained a healthy, stable and fast growth in the first half of the year, economists with the NBS said.

Export difficulties, deflation and unemployment remain

The economists also said that the economy is still confronted with some protruding problems. Increasing uncertainty in international situation has an adverse impact on Chinese economy. Falling oil prices in the international market weighed down factory prices of Chinese industrial products, which in turn contributed to a downward trend of consumer price index.

Despite growing signs of recovery in the economies of the United States and Japan, the international community remained cautious about how long or how further the recovery can go.

Local economists warn against over-optimism of the international environment, saying China may face greater difficulties in expanding exports in the latter half of the year.

In the meantime, the country is facing greater unemployment pressure as it accelerates industrial restructuring after entering the World Trade Organization (WTO).

Deflation also spells a headache. In the first six months of the year, the consumer price index (CPI) dropped 0.8 percent over the same period of last year, though the central government has carried out a pro-active fiscal policy to stimulate growth over the past five years.

Despite the problems, President of the World Bank James Wolfensohn said the Chinese government have been taking active andappropriate measures to handle the challenges. He said the government's efforts to address these problems made him confident about the growth prospect of Chinese economy.

Chinese economist Wu Jinglian said the Chinese government spares no efforts in the reform of state-owned enterprises and economic restructuring, and the effectiveness of government's policies of increasing civil servants' income and encouraging consumption has been manifested in surges of housing and automobile sales in the first half of the year.

NBS figures also showed education and entertainment have become the second largest spending of average Chinese households, following food and clothing.

Economists say that as long as there is no major change in the international environment in the latter half of the year, the Chinese economy is most likely to stay in fast track.

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