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Home >> Business
UPDATED: 12:50, August 08, 2005
Fast, stable economic growth expected to hold up
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A leading economic policy-making body said Friday it believes that China's economy will stay on a "stable and fast-growing" track, but warned of the abated but still whopping investment growth and increasing trade disputes.

The world's sixth biggest economy clocked in at a higher-than-expected 9.5 percent growth in the first half of 2005.

"The investment size is still too large," the State Development and Reform Commission (SDRC) said in a report that analyzes the "current economic situation".

China began to cool down its economy -- whose overheating, according to economists, was exactly triggered by excess investment in some sectors including steel, cement and aluminum -- one year ago by curbing bank lending and land supplies.

Correspondingly, investment growth slackened from a record high of nearly 50 percent to a much more rational 20-odd percent. That, however, climbed up again in the third straight month last June.

The SDRC blamed the resurgence for a "still unreasonable investment structure and new, disordered construction in some sectors."

"Typically, the chaos in real estate market have yet to be removed."

Earlier this year, China took a slew of measures including the hike of interest rates for the housing and property development loans to regulate the unhealthy real estate market.

Housing prices in the industrial and business hub of Shanghai witnessed tangible declines after doubling in recent years on the back of speculative purchases, while in Beijing the prices seemed to be unaffected.

Nationwide, first-half property investment surged 23.5 percent, a drop of 5.2 percent year on year, the National Bureau of Statistics has reported.

China's economy has long been an investment-driven one.

Exports, however, have contributed more to the gross domestic product hike in the past few years. Both exports and imports exceeded 300 billion US dollars in the first six months, the SDRC said.

The SDRC report acknowledged that "trade imbalances and disputes are outstanding."

Textile trade frictions between China and the United States were seen more frequently after global limits on exports of such products were removed.

Last month, China unexpectedly appreciated its currency, the yuan, by 2 percent, but emphasized that the decision was made on the basis of its own need of reform of the exchange rate regime, instead of succumbing to foreign pressure.

Some developed countries, typically the United States, argue that China "artificially lowered" the yuan by as much as 40 percent, giving its exporters an "unfair trade advantage".

On Friday, the SDRC also said, "the downside of grain prices, rise of agro-production material prices and comparatively more aggravate natural disasters could combine to have a negative impact on agricultural production and farmer's earning."

This is despite a predictable 21-billion-yuan (2.6 billion dollars) reduction of farmer's economic burdens this year thanks to a central government decision to scrap the agro-tax, which appeared in the place of China centuries ago.

China is endeavoring to narrow the income gap between urban and rural dwellers and spur consumer spending in its vast rural areas as part of the efforts to promote its balanced development.

In the first half of the year, Chinese farmers reported a 12.5 percent rise of earnings in cash from the same period in 2004, faster than the 9.5 percent increase enjoyed by urban residents.

Generally, the SDRC said, the growth of consumer demand was quickening as the first-half increase of total retail sales was 1.8 percentage points higher than the same period last year.

The commission said it noticed that the increase of industrial profits was slowing down and that energies such as coal, electricity and oil were still in short supply.

But the "fundamental elements" conducive to China's economic growth remain in place, it said.

"We should maintain the continuity and stability of macro-economic policies and continue to control tightly the twin-valves of land supply and bank loans."

Source: Xinhua


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