Economist Elaborates on Six Macro-economic Problems

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Last updated at: (Beijing Time) Sunday, August 24, 2003

Economist Elaborates on Six Macro-economic Problems

Qiu Xiaohua, deputy director of the National Bureau of Statistics, said Saturday that six problems are hindering China's economic growth. These problems are weak consumption, the lagging service industry, high pressure on employment, difficulty in raising farmers' incomes, rapid increase in the amount of loans and wasteful duplication of construction.

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Qiu Xiaohua, deputy director of the National Bureau of Statistics, said Saturday that six problems are hindering China's economic growth.

He said at a forum on enterprise management that these problems are weak consumption, the lagging service industry, high pressure on employment, difficulty in raising farmers' incomes, rapid increase in the amount of loans and wasteful duplication of construction.

Qiu noted that China's economy is still on the fast track, and the impact of the outbreak of SARS is temporary.

The target of a seven-percent economic growth set for this year is "very possible" to achieve, said Qiu, adding that it may even reach eight percent.

Analyzing this year's economic development, Qiu said that demand and investment had played a more prominent role in the economy, and the manufacturing industry is its major driving force.

However, Qiu admitted that problems have been exposed in the current course of economic development.

Qiu noted that worldwide, on average, 70 percent of economic growth comes from consumption, while investment contributes only some 20 percent. In China, investment contribution has been 13 percentage points higher than world's average, while that of consumption is 17 to 18 percentage points lower than the world's average in recent years. The gap is even bigger in this year's economic development, he noted.

Statistics show that in the first half of this year 70 percent of economic growth came from investment.

According to Qiu, the weak service industry might raise the pressure on employment, which is already in a strained state. In 2003, China's newly added labor force will reach 10 million, including 2.12 million college graduates.

By the end of June this year, the registered unemployed population had reached nearly eight million, or 4.2 percent of the total population. In the meantime, the outbreak of SARS threw nearly seven million rural people out of work.

The SARS outbreak also reduced the income of farmer-turned-workers, and depressed the demand for farm produce, thus affecting the income of rural people. Statistics show that in the second quarter of this year the per capita cash income for farmers decreased by 35 yuan over the same period. In the first half of this year, farmers' per capita income increased by only 3.2 percent over the same period last year, or 2.6 percent after deduction of inflation.

Qiu also warned about the trend of a rapid increase in the total size of loans, which stood at 1.76 trillion yuan in the first half of this year. This figure equals the total amount of newly increased loans for last year.

The trend of wasteful duplication of construction has also damaged China's economy, said Qiu, citing the iron-and-steel and textile industries as the worst offenders. Duplication of construction brings exorbitant competition, reduces profits and increases banks' financial risks, Qiu warned.

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