China's Economy to Retain Upward Trend

China's economy, which is expected to maintain its growth momentum in the second half, will definitely see a higher growth rate this year than the 7.1 per cent in 1999, Ye Zhen, spokesman of the National Bureau of Statistics (NBS), told a press conference in Beijing Tuesday.

NBS figures show that China's economy grew by 8.3 percent year-on-year in the second quarter, comparing with 8.1 percent in the first quarter. The growth rate was 8.2 percent over the first half year, 0.6 percentage points higher than in the same period of last year.

Ye said that the economy has reversed a slowing trend and shown steady signs of a comeback. He cited a number of favorable factors for continuous improvement of the economy in the next six months.

First, the Chinese government is determined to continue to carry out a pro-active fiscal policy for the rest of the year. Over the past two years, the government has issued more than 310 billion yuan (US$37.35 billion)-worth of additional treasury bonds to fund infrastructure construction. The government investment has effectively stimulated demand and laid a sound foundation for future economic growth.

Secondly, the factors that have had lagging effect on the economy overtime have taken a positive turn. Over the first half year, growth of output of steel, cement, nonferrous metals, crude oil and electricity exceeded economic growth. Price indices of industrial products and raw materials rose by two percent and 4.3percent respectively over one year ago. Ye said that the price hikes of raw materials is most likely to push up prices of consumption goods in the second half of the year.

Over the first half year, stockpiles at industrial enterprises grew by a diminished rate of 1.4 percent, far less than the growth of 9.9 percent of industrial output.

Ye said that since stockpiles have been cut over the first half of the year, the growing demand will push up economic growth in a bigger way in the second half of the year.

From January to June, Chinese people became less interested in saving their money owing to interest rate cuts, newly imposed tax on interest and the requirement that they must use real names for bank accounts.

Of the 364.5 billion yuan (US$44 billion) worth of newly increased savings deposits over the period, 255.8 billion yuan (US$30.82 billion) was in current deposit accounts rather than long-term deposits. The growth of current deposits was 244.8 billion yuan (US$29.5 billion) more than that in the same period of last year.

Over the first half of the year, indices of investment sentiment, consumer confidence and entrepreneur confidence all surged to new highs. China's stock market witnessed the biggest boom among all stock markets in the world.

Third, non-government investment has begun to pick up. From January to June, investment by collective enterprises grew by seven percent over the same period of last year, while investment by private enterprises grew by 8.6 percent.

Fourth, the growing volume of exports and foreign investment contracts have laid a sound basis for growth in the next six months. Over the first half year, export orders of industrial goods surged by 27.2 per cent, while contract value of direct foreign investment jumped by 24.6 per cent.

However, the value of actual foreign investment was US$17.16 billion in the first half of the year, 7.5 percent less than in the same period of last year.

Fifth, the Chinese government's decisions to accelerate development of the western parts of the country and help loss-making state-owned enterprises (SOEs) out of difficulties by the end of the year will spur economic growth. The improvement of the global economy and China's expected entry to the World Trade Organization (WTO) will also boost the economy.

Ye said that the bounce back of the economy is still not stable because of inadequate demand. The country has yet to resolve such problems as slow growth of farmers' income, troubled SOEs and the imbalance of the economic structure.

He said that the Chinese government will continue to carry out a pro-active fiscal policy in the second half of the year. It will also step up reform of the economic structure and system, accelerate restructuring SOEs and improve environments for investment, financing and service of private companies.





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