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Factors Favor Economy in Latter Half Year
Mexican Secretary of Economy Luis Ernesto Derbez reiterated Mexico's stand of support for China's WTO accession Friday, saying that the remaining problems would not affect China's admission process.
He made the remark during bilateral talks on China's accession to the World Trade Organization in Beijing earlier today. His remark was favorable news for China's economic growth in the second half of the year.
Upon its accession to the WTO, China will be a very positive economic force for Asia as a region, said Homi Kharas, acting chief economist of the World Bank.
According to the spokesman of the National Bureau of Statistics (NBS) Ye Zhen, there are increasing favorable factors for economic growth in the latter half of the year. The factors include expanding domestic demand, improving economic efficiency, stimulating economic policies, accelerating influx of foreign direct investment, the 2008 Olympic Games being awarded to Beijing and the pending WTO accession.
These factors combine to enhance the confidence of both consumers and investors in the country. Results of the latest confidence survey show that over 50 percent of Chinese consumers are optimistic about the performance of the economy in the next 12 months. At the same time, the index of entrepreneur confidence surged to its second highest point in history.
Since consumption contributes to more than 50 percent of the gross domestic product (GDP) in China, the rally of sentiment among consumers and entrepreneurs has a significant bearing on the expansion of domestic demand in the next six months.
Well-known Chinese economist Wu Jinglian pointed out that China has revised the downward momentum in economic growth that started in 1997. Despite disagreements among economists on this observation, facts prove that the measures that the Chinese government adopted on both the supply and demand sides have been effective.
In the first half of this year, domestic demand contributed to 93 percent of China's economic growth, thus proving the effectiveness of the pro-active fiscal policy.
In the latter half of the year, a major part of the funds that the government gained from issuing 150 billion yuan worth of treasury bonds this year will be channeled to construction projects. On the other hand, rising prices of grain are expected to help increase farmers' incomes in the next six months. As a result, both investment and consumption demand will see stable growth.
Meanwhile, strategic restructuring of the state-owned economy and the reform of state-owned enterprises has helped increase the vitality of enterprises in China. Economic efficiency of industrial enterprises reached the highest level in history at the beginning of the year. Though the growth rate of corporate profits has been declining over the past few months, the profits are still growing at a double-digit rate. Local experts pointed out that in the latter half of the year, the impact of a slowdown in the world economy on China's exports will appear. On the other hand, preparations for the Olympic games, the WTO accession and growing foreign direct investment will stimulate the development of China's economy. The National Bureau of Statistics predicts that the preparation for the Olympic Games will push up economic growth by an average of 0.3-0.4 percentage points every year in the next seven years.
Since the beginning of this year, the influx of foreign direct investment maintained a growth rate of 25 percent. It is expected that China's accession to the WTO by the end of the year will help bring about a new round of rapid growth of foreign investment in the country.
Wu Jinglian said that China's economy mainly depends on domestic demand for sustainable growth. He said that there is still huge room for growth in domestic demand at present. According to Wu, if China continues to push forward reforms and overhauls the existing system, and carries out effective macro- economic policies, the economy will be able to sustain a steady and rapid growth provided the slowdown of the world economy does not exacerbate rapidly.
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