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Chinese economy in fast lane despite SARS
The Chinese government is fully confident of achieving a 7 percent growth rate for the country's national economy in 2003, a target that was set at the beginning of the year.
"With the effective containment of SARS (severe acute respiratory syndrome), industries affected most seriously by the epidemic are picking up," said Vice-Premier Wu Yi at a recent international conference. "The Chinese economy will keep a good momentum of stable growth."
According to Yao Jingyuan, chief economist with the National Bureau of Statistics (NBS), China generated a gross domestic product (GDP) of 5.0053 trillion yuan (US$605 billion) in the first six months of this year, up 8.2 percent from the same period of last year, one of the fastest growths in recent years.
China's national economy is in a fairly good shape, according to Yao, as fiscal revenue, corporate profits and individual incomes all increased substantially in the first half-of-the -year, despite the outbreak of SARS.
"Robust economic growth in the first six months of this year is owed primarily to soaring investment in fixed assets, a consumption structure upgrade (meaning people buy more expensive things), industrial restructuring and export growth," he said.
According to NBS, China's investment in fixed assets, or capital spending, in the first six months surged 31.1 percent year-on-year, with the number of big-ticket projects under construction reaching a new high. Of the 1.9 trillion yuan (US$230 billion) of capital spending in the period, more than a quarter went to super-big projects each with an investment of more than 100 million yuan.
"Construction of big projects led to a rapid growth in capital spending in the first half of this year," Yao said.
Official statistics show that China's fiscal revenue in the first half of 2003 reached 1.096 trillion yuan (US$132 billion), up 27.4 percent over the same previous period, that profits of industrial enterprises were 291.8 billion yuan (US$35 billion) in the first five months, up 62.8 percent, and that per-capita incomes of urban and rural residents in the first half-of-the- year were 4,301 yuan and 1,158 yuan respectively, up 8.4 percent and 2.5 percent.
In the first half of this year, 36 of the 39 major industrial sectors reported profit growth. Crude oil and natural gas mining, transport equipment manufacturing, ferrous metal smelting and rolling, and chemical and power industries together made additional profits of 72.18 billion yuan (US$8.7 billion), 64.1 percent of the total additional profits made by the industries. Problems
China's central bank, the People's Bank of China (PBC), however, has some reserved opinions on the robust economic growth.
Zhou Xiaochuan, governor of PBC, said at a recent working conference, that in the second half of the year, the PBC will pay priority attention to risks resulting from the rapid growth of bank loans. Statistics show that loans provided by banks in the first half of 2003 are close to the total loans they provided last year.
To guard against inflation, Zhou emphasized that the central bank will strengthen financial macro-controls and make sure that its monetary policies are farsighted and scientific.
Economist Peng Guangming said the Chinese economy at present is characterized by "excessive investment, insufficient consumer spending and an imbalance of macro-economic growth." Echoing his opinion, Economist Zhang Shuguang insisted China's economy should "grow at a reasonably fast speed."
According to Yao Jingyuan of NBS, SARS began to have a negative impact on the Chinese economy in the second quarter. Passenger transportation, catering, social services and tourism industries were hit hardest by the epidemic. In the second quarter, growth of the national economy stood at just 6.7 percent, down 3.2 percentage points from the first quarter.
The tertiary industry was up by only 0.8 percent in the second quarter, down 6.1 percentage points from the same previous period. Passenger transportation volume dropped 23.9 percent during the period, and the air passenger transportation volume shrank by almost half.
A survey conducted by NBS shows that the incomes of the social service sector in the first six months of the year were down 14.8 percent from the same previous period, and retail sales were up 6.7 percent, 2.5 percentage points lower than in the first quarter.
Despite various negative factors, Qiu Xiaohua, deputy director of NBS, has confidence in the Chinese economy, predicting that China's economic growth will show a "U" pattern for 2003, with high growth in the first and fourth quarters.
According to NBS statistics, in the first quarter, China witnessed the fastest economic growth for the same period since 1995; in the second quarter, owing to the impact of SARS, its GDP growth fell to the lowest point since 1992. However, since June, when the epidemic was brought under control, the national economy began to move upward.
"The overall effect of the SARS epidemic on the Chinese business community is minimal thanks to government work efficiency," said Edmund James, chairman of the Far-sighted Investment International Public Company of the UK.
"Initially, we anticipated that it would take maybe six months, but instead it took only two months for China to eliminate the virus."
Judging from the country's overall economic performance in the first half of the year, Qiu expressed belief that the SARS impact was temporary, regional and limited. It did not touch the basic elements of the economy or alter the rapid growth of China's economy. "The overall economic situation has remained positive," said Yao Jingyuan of the NBS, adding that, "the 7% growth rate for the national economy in 2003 is attainable.
The Development Research Center of the State Council declared that China's economy has entered a new round of expansion in 2003 after a seven-year slowdown, thanks to the government's stimulating policies of increasing fiscal expenditure and money supply in the past five years.
The power of the policies came into full play in the first half of 2003, said the research center, noting that enterprises eager to invest and prepare for a fresh expansion by renewing equipment and technology on a large scale, and the rising demand for housing and cars, has triggered a rapidly-growing demand for steel, energy and building materials. This, in turn, has led to a shortage of electricity and rising prices for raw materials. "Finally, China has shaken off its persistent deflation trend after five years," the research center reported.
Economists believe that SARS constituted "an impact" rather than a crisis. The basic factors underpinning China's long-term economic growth -- including its great market potential, rich labor resources, relatively adequate capital, improved infrastructures and adequate supply of basic products -- have remained intact. Besides which, the Chinese economy has endured various challenges in recent years and shown an ever-increasing stability.
Its performance -- during the Asian financial crisis of 1997, the September 11 terrorist attacks in the United States and the Iraq war -- has impressed the world.
Foreign investors worldwide still have great confidence in the Chinese economy. Official statistics show that in the first six months, the country's contractual foreign direct investment (FDI) reached US$51 billion, up 40.3 percent over the same previous period, and foreign investment that was actually committed in the period was US$30.3 billion, up 34.3 percent.
"China has successfully curbed the contagious SARS, and with continued inflow of foreign capital, the country is expected to maintain a fast, steady economic growth," said Fan Jianping, deputy director of the Economic Prediction Department of the State Information Center. -- Yu Donghui & Zhang Wei