Economic Figures Show Deflation Being Curbed

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Last updated at: (Beijing Time) Monday, April 14, 2003

Economic Figures Show Deflation Being Curbed

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The latest official statistics show that China's consumer price index (CPI) finally reversed a downward trend that had lasted more than a year to grow by 0.3 per cent year on year in the first two months of this year. In 36 major cities, the index recorded 0.5 per cent growth compared to the same period last year.

Analysts in Beijing said that various economic indices from the first quarter have provided evidence that the deflation trend affecting China's economic operations might be over soon.

Xie Ping, director of the research bureau of the People's Bank of China, China's central bank, said on Friday that major economic indices for the first three months indicated that the national economy is in quite good shape.

The indices from the first quarter show that the growth of gross domestic product (GDP) was well over last year's 8 per cent on an annualized basis.

The CPI has reversed its decline, while total loans increased by 800 billion yuan (US$97 billion) - 500 billion yuan (US$60 billion) more than the same period last year. Total deposits also rose by 800 billion yuan - or 300 billion yuan (US$36 billion) more than the same period last year.

Xie held that these positive statistics can be seen as evidence that the trend of deflation is being reined in.

Cong Ming, from the State Council research institute, said that the price of raw materials has been rising for a long time and, with the tight supply of energy and the expanding scale of construction, the prices of energy and investment products will continue to rise in the coming months.

In addition, Cong said the fast enlargement of money supply will also support price increases. These factors are gradually removing the impact of the deflation trend on the Chinese economy.

A report published on Friday by the Macroeconomic Research Institute said that industry, investment and exports all experienced high growth in the first quarter, indicating that an internal growth mechanism is taking shape in the Chinese economy, and the problem of insufficient effective demand for the short term has eased considerably.

Official statistics show that, in the first quarter, China's foreign trade displayed strong growth. Exports of machinery and electronics products, which account for half of China's total exports, increased by 42.1 per cent in the first two months, a growth rate 20 percentage points higher than the same period last year. Export of new and high-tech products increased by 51.8 per cent, a rate 22 percentage points higher. At the same time, imports of motor vehicles, crude oil and other products also increased sharply.

Industrial output has maintained strong growth for 14 months in a row and, in the first two months of this year, the industrial added value increased by 17.5 per cent over the same period last year, the highest rate since 1996. Industrial enterprises realized an aggregate profit of 98 billion yuan (US$12 billion), 1.2 times that for the same period last year.

At the same time, corporate investment has risen sharply since the beginning of this year. In the first two months, the proportion of such investment in the country's total investment increased by 2.6 percentage points.

The report held that, based on various macroeconomic indices, the growth of GDP in the first quarter is expected to exceed 9 per cent. That for the first half of this year is likely to be over 8 per cent, and the figure for the whole year will probably also reach 8 per cent.

Analysts cautioned that an inefficient economic structure and system continue to be major factors hampering economic development but that the current good macroeconomic environment has provided a good opportunity to solve these problems. (China Daily News)

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