April 22, 2005
Asia Times
BEIJING - The Chinese economy, which grew at a 9.5% annual rate in 2004, continued to achieve satisfying performance in the first quarter of this year. However, in view of economic data released by the National Bureau of Statistics (NBS) on April 20, it is still being impeded by five major problems that must be solved urgently.
First, there have been serious setbacks in the agricultural sector. There were two positive indicators for the agricultural sector in the first quarter: the summer grain planting area increased by 4.8%, reversing a seven-year decline, and the per capita cash income of rural residents grew 11.9% in real terms, outpacing the per capita income growth of urban residents. However, there were serious droughts in south and southwest China, and serious crop diseases and freeze injuries to wheat crops in some areas during the spring, which may have substantial influence on the summer grain harvest this year. Another problem is that market prices increased faster in rural areas than in cities in the first quarter. Sharp hikes of agricultural input prices in particular may nullify part of the increase in farmers' income.
Second, the level of fixed asset investment is still unsustainably great. In the first quarter, China's fixed asset investment increased 22.8% year on year. Although this rate was 20.2 percentage points lower than the year before, NBS spokesman Zheng Jingping said the 22.8% growth of fixed asset investment was calculated based on a high baseline due to a fast rise of 43% last year, and therefore the current investment rate was still excessive. Measured by the planned investment of projects under construction, the total investment involved in construction projects by the end of March was 26.7% more than that a year earlier, which is still very high, he said.
Experts of the State Council Development Research Center also warned that the current growth rate of investment in real estate development and urban construction is still too high and it is necessary to keep alert for a possible market collapse caused by "blind investment".
Third, inflationary pressures still exist. China's consumer price index rose 2.8% year on year in the first quarter. The nominal figure could be considered satisfactory, inasmuch as the annual inflation rate target is under 4%. But citizens still feel that price pressures are too high. In the first quarter, for instance, the price of raw materials surged 10.1%, crude oil prices remained high, the prices of home appliances and other consumer goods began to rise in tandem with price increases for their inputs, and the prices of public goods like energy and services are under great price pressure owing to large increases in fixed-asset investments. However, grain and food prices, which led price rises last year, have stabilized somewhat this year.
Fourth, supplies of coal, power, oil and transportation remain extremely tight. Experts suggest that comprehensive measures should be taken now to increase the effective supply of these goods and services. Fifth, undesirable contradictions in economic structure are still acute. For example, first-quarter data indicate that production and export levels of high-energy-consuming and highly polluting industries such as metallurgy, building materials and coke increased rapidly. In the first two months of the year, for instance, exports of steel billet and coke surged 11-fold and 60% respectively. It is estimated that the energy consumption per unit of GDP output in China is still rising, rather than declining.
According to the latest economic data released by the National Bureau of Statistics (NBS) on April 20, China's GDP grew by 9.5% to 3.1355 trillion yuan (US$379 billion) in the first quarter of this year, a growth rate 0.3 percentage points lower than the year before. The value-added of primary industries went up 4.6% year-on-year to 228.7 billion yuan, while that of secondary industries went up 11.3% to 1.84 trillion yuan. Meanwhile, the value-added of tertiary industries had a year-on-year growth of 7.6%, reaching 1.07 trillion yuan.
All these figures showed that China's economy maintained stable and rapid growth as a whole. The NBS said the investment in fixed assets stood at 1,099.8 billion yuan in the first quarter, up 22.8% year on year. The growth rate represented a drop of 20.2 percentage points from a year earlier. According to the bureau, investment in urban areas increased by 25.3% to 903.7 billion yuan in the period, while that in rural areas rose by 12.7% to 196.2 billion yuan. Of the total investment in urban areas, 232.4 billion yuan went to real estate development, up 26.7%.
Investment in agriculture, forestry, animal husbandry and fisheries increased by 39.9%, that in coal mining and washing jumped by 86.1%, that in electricity, gas and water production and supply grew by 44%, and that in the railway industry soared by 430%. In accordance with the government's macroeconomic regulation policy, investment in cement and metallurgical sectors was "under continuous control", the bureau said.
Investment in non-metal products, and in the non-ferrous metal dressing, smelting and pressing industry declined by 2.9% and 1.4% respectively, while that in the ferrous metal dressing, smelting and pressing industry rose by 6%. NBS spokesman Zheng Jingping attributed the slower growth to the enhanced macroeconomic regulation by regions and departments at various levels in line with the directive of the central government to follow a scientific approach to development and to seek sustained and healthy economic growth.
China's large industrial enterprises reported 1,441.5 billion yuan of value added in the first quarter of this year, up 16.2% over the same period last year. Large industrial enterprises entering the NBS statistics refer to those with an annual sales revenue of more than 5 million yuan. NBS spokesman Zheng Jingping said at a press conference that the value-added of the country's heavy industry rose by 16.3% in the period, while that of light industry rose by 16%. By product category, the output of electricity, coal and rolled steel increased by 13%, 9.1% and 22.4% respectively. The production of microcomputers, mobile phones and fax machines rose by 57.7%, 23.9% and 34.1%, and that of motor vehicles grew by 1.6%, with the output of sedans dropping by 2.8%. Large industrial enterprises continued to witness growing profits in the first three months of the year, reaching a total of 165.3 billion yuan, a year-on-year growth of 17.4%, Zheng said.
Of the total, state-owned and state-held enterprises registered a profit increase of 14%. The income of urban and rural Chinese had a relatively rapid growth in the first three months of this year. During the January-March period, the per capita disposable income of urban residents stood at 2,938 yuan (US$355), a year-on-year rise of 11.3%, or 8.6% if price factors were deducted. The per capita cash income of rural residents reached 967 yuan, an increase of 15.9%, or 11.9% in real terms.
China's total retail sales of consumer goods amounted to 1,511.2 billion yuan in the first quarter, up 13.7% year on year. Real growth after inflation hit 11.9%, 2.7 percentage points higher than the year earlier period. China's import and export volume totaled $295.2 billion in the first quarter, up 23.1% year on year. Of the total, exports accounted for $155.9 billion, up 34.9%; and imports, $139.3 billion, up 12.2%, leaving a surplus of $16.6 billion.
Newly committed inward investment in the country came to $35.2 billion in the first three months of 2005, up 4.5% year on year. Actual use of inward capital in the period amounted to $13.4 billion, up 9.5%. Lastly, foreign exchange reserves stood at $659.1 billion at the end of March, an increase of $49.2 billion over the end of last year.
http://www.atimes.com/atimes/China/GD22Ad06.html