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China's Economy to Grow by 7.3 Percent in 2001: ADB
China's economy is forecast to grow by 7.3 percent in 2001 and 7.5 percent in 2002, according to the Asian Development Outlook (ADO) released Wednesday by the Asian Development Bank (ADB).
"Three consecutive years of expansionary fiscal and monetary policy have helped China's economy escape the worst effects of contagion from the Asian financial crisis," according to the ADO, an annual publication analyzing and forecasting economic trends.
During the period, the country has maintained a stable exchange rate and achieved robust growth. But the current challenge for the country is maintaining high growth rates in a less expansionary fiscal and monetary environment, according to the ADO.
"China's economy maintained a hefty growth of 8.1 percent in the first quarter. China saw a fast growth of farmers' incomes, an acceleration of industrial production and a surge in the fiscal revenue," said Tang Min, chief economist with ADB.
"All these growth figures were even better than we had expected, " he stressed.
But the growth is likely to slow down in the next three quarters, due to the global economic slowdown, oil price hikes and reduced gains from reforms of Chinese state-owned enterprises, he pointed out, adding that salary increases, however, may contribute significantly to GDP growth as it will stimulate domestic consumption.
The ADO's gross domestic growth (GDP) projections for this year and 2002 represent an easing off from the 8 percent achieved in 2000.
"Domestic consumption will remain strong. But rising oil prices will push up production costs, and food prices could also rise slightly in the first half of 2001 after a fall in grain production in the second half of 2000," according to the report.
With a pickup in domestic consumption and economic growth, the deflationary trend of 2000 will be reversed, the report adds. Inflation is likely to reach 22.5 percent in 2001-2002.
Foreign direct investment (FDI) will increase by a large margin this year, and is expected to contribute 4 percentage points to this year's GDP growth, the report forecasts.
In 2000, FDI increased by 1 percent and contractual foreign investment was up by 51 percent.
Thanks to a recovery by the countries affected by the Asian financial crisis and strong growth in the U.S. economy, exports from China surged in 2000 by 27.8 percent to 249 billion U.S. dollars, while imports soared by 36.8 percent to 217 billion dollars.
However, export growth is forecast to drop to about 10-15 percent in 2001-2002, as the global economy slows.
The ADO sees China's imports continuing to grow faster than exports in the next few years, in the wake of China's entry into the World Trade Organization (WTO) and the liberalization of trade policies, including fewer tariff and non-tariff barriers.
China's entry into the WTO, with its commitments to cut tariffs, liberalize trade and investment, and open domestic sectors to foreign participation, will lead to significant efficiency gains, more competition, and wider consumer choice, the ADO says.
As a result of redundancies among workers and rural-urban migration, urban unemployment and poverty increased in the second half of the 1990s.
The official estimate of urban unemployment in 2000 was 3.1 percent of the urban labor force, the same level as in the previous year. But if 7 million laid-off workers through reforms of the state-owned enterprises (SOEs) were included, the figure would rise to about 7 percent.
The ADO points out that, among others, the government should develop alternative social security services to those that were traditionally provided by the SOEs as well as generate more employment.
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