China's Economy Steams Ahead Despite ProblemsChina's economy has managed to shrug off a two-year fluctuation trend and maintained a steady growth of around eight percent over the first half of this year.According to an analysis report by the State Development Planning Commission (SDPC), the economy is expected to grow 7.3 percent in the latter half of the year and reach an annual rate of 7.6 percent. Official figures show that Chinese government's active fiscal policy and improving international conditions have combined to shove the economy forward. Through issuing 100 billion yuan-worth of treasury bonds, the Chinese government was able to boost investment in fixed assets by a year-on-year 9.5 percent in the first five months of this year. The endeavor also spurred domestic demand. The recovery of Asian economies helped to push up the country's foreign trade volume by 36.1 percent over the first five months of this year. Local economists say that China's economy has ducked out from under the shadow of the Asian financial crisis and successfully secured a rapid growth rate. However, Deputy Director of the National Bureau of Statistics ( NBS) Qiu Xiaohua said that people shouldn't be blindly optimistic about prospects for the economy. As the country is struggling to restructure its economy and set up a new mechanism of operation, the problem of inadequate domestic demand has become more prominent. Consumer demand is playing an increasing but unsteady role in promoting economic growth. From January to May, consumption of energy, raw materials and cargo transport picked up pace, the consumer price index stopped dropping, retail sales grew faster, and consumer confidence climbed continuously. However, seasonal factors played a major role in rise of prices. And surges of imports were driven by quick growth of exports and inflated prices of crude oil instead of domestic demand. Another annoying problem for the economists is to determine the role private investment is playing in the economy. Since the Chinese government has yet to compile statistics on investment made by private and collective-owned companies, it is hard to judge the effect that government investment has had on boosting private investment. A SDPC estimate indicates that government investment accounted for about 90 percent of the newly increased investment in the country in 1999. However, Wu Jinglian, a renowned economist from the Development Research Center (DRC) under the State Council, said that his recent investigations in east China showed that the private sectors are growing more interested in investment. He said that if the government adopts appropriate policies to facilitate private investment, the private sectors will play a greater role in sustaining rapid economic growth. Some local economists say that the country's struggle to fight off deflation has produced a favorable opportunity. To prove their point, they cited official figures showing that corporate profits more than doubled as sales-production ratio surged to a new high over the first five months of the year. The crop mix of the farming industry has also improved and become increasingly market- oriented. However, some other economists pointed out that the surge of corporate profits was mainly due to the international competition and preferential government policies. Reduction of costs only played a minimal role in boosting profits. They noted that effects of economic restructuring on stimulating consumer demand will take time to appear. Therefore, in the short term, sustainable economic growth depends on the increase of investment demand that was driven by government investment. Chinese Premier Zhu Rongji pointed out in his government report earlier this year that China will continue to carry out an active fiscal policy so as to secure rapid and sustainable growth and create favorable conditions for further restructuring the economy. |
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