Economy Free from Inflation -- EconomistsThe Chinese economy has no inflationary pressure, although the consumer price rose 1.1 per cent during the first half of this year, officials and experts said."For the whole of 2001, the consumer price index (CPI) will rise no more than 2 per cent," said Qiu Xiaohua, deputy director of the National Bureau of Statistics. "The rate should be relatively moderate." The economy still faces deflationary pressure, although the pressure has been eased slightly, he said. ``The overall demand and supply are still unbalanced.'' Qiu's idea was shared by Zhang Xueying, an economist at the State Information Centre, saying more than 90 per cent of the country's industrial products are oversupplied. On the other hand, China's exports, an important engine for the growth in gross domestic product (GDP), decreased because of the slowdown in world economy, Zhang said. The growth of exports dropped to 8.8 per cent during the first half of this year from a 28 per cent a year ago. The growth of exports further dropped to 6.6 per cent in July. Therefore, the government pinned its hope on domestic demand -- fixed assets investment and consumption -- to boost the economy. With an aim to lift consumer spending, the Chinese central bank has announced seven successive interest rate cuts over the past four years and began to levy income tax on bank deposits in 1999, slashing the real interest on one-year deposits to about 1.8 per cent. The central government also took other measures such as increasing salaries, providing compensation for laid-off workers, providing more pensions for the retirees and announcing a consumption-boosting, week-long National Day holiday and May Day holiday, to boost consumption. "The central government could not expect Chinese urban consumers to spend further as they have much more worries such as pension, medical care and children's education," Zhang said. The country has yet to establish a nationwide social security system. The rural population, which have more consumption desire, did not have enough money because of the slow growth of income. Statistics indicate that per capita cash income of farmers reached 1,063 yuan (US$128) during the first half of this year, an increase of only 4.2 per cent from the same period of last year. The slow growth of farmers' income will greatly affect the implementation of the government's demand-stimulating policy, as 800 million farmers form a huge rural market vital to the country's domestic demand. "If consumption in rural areas cannot be stimulated, the full expansion of domestic demands, a strong engine for economic growth, will not be realized,"he said. In the aspects of fixed assets investment, the State investment still plays a major role. The fixed assets investment in the first half of this year totalled 1.2 trillion yuan (US$145 billion), an 15.1 per cent increase from the same period last year, while the corresponding growth rate of non-government investment slowed by 2.1 percentage points from a year ago to 6.5 per cent. Private investors are still excluded from many competitive industries such as automobile manufacturing, civil aviation and power generation and transmission. Sources: China Daily |
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