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How to interpret China's economy in first half of 2007?
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17:07, July 23, 2007

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"11.5%, hot, hot indeed," a journalist murmured to himself after reading the national economic statistics grabbed from the news conference of the State Council Information Office.

Indeed, telling from the statistics of the first six months, China's economy did surge. The GDP growth rate hit 11.5%, up 0.5 percentage points over the same period last year. The growth rate is 11.1% and 11.9% respectively in the first and second quarter of the year. However, instead of only looking into the GDP indicator, we should give a comprehensive analysis.

Structure: stable investment with increased consumption

The gap between investment and consumption growth rates is narrowing, which means that consumption is contributing more to economic growth.

Based on past circumstances, the national economic overheating is often indicated on investments. Since the beginning of this year, although investment in fixed assets continued to operate at a high level, the growth was not as that "prominent." In the first half of the year, fixed-assets investment growth rate reached 25.9%, down by 3.0 percentage points from the same period of last year. Although the growth rate is 2.2 percentage points higher than that of the first quarter, which, as a result, intensified investment rebound pressure, State Statistical Bureau spokesman Li Xiaochao believes think this "was not accidental."

First, the number of new projects increased. Under the policy control of new projects, the total planned investment of new projects has shown a slow growth in 2006. In the first half of this year, the total investment involved in new projects grew by 6.4%. This is the second time for the investment to grow positively since May. Second, excess liquidity provided sufficient social funds for investment. Third, increasing profits and promising profit prospects of some enterprises and industries encouraged more enterprises to increase investment. Fourth, investment in some industry with relatively low investment cost has increased.

In a very long time, China's economy growth is too much dependent on investment. But since the beginning of this year there are some new changes. In the first quarter, a significant turning point occurred: investment declined and consumption rose. In the first six months, the situation was moving in a more positive direction. The growth rate of fixed-assets investment was 25.9%, down by 3.9 percentage points from the same period last year. The total retail sales of consumer goods increased by 15.4%, up 2.1 percentage points. Obviously, the gap between the growth rate of investment and consumption was narrowing down, which means that consumption was contributing more to the country's economic growth.

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