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Since the beginning of this year, Guangdong's economic climate obviously turned for better trend with a quickening economic development. According to preliminary estimation, the gross domestic product (GDP) in the first quarter was 266.65 billion yuan, up by 13 per cent or 2.5 percentage points higher than that over the same period of the previous year, representing the highest level since 1995. Of this total, the value--added of the primary industry was up by 3.7 per cent; the secondary industry, 15.3 per cent; and the tertiary industry, 11.6 per cent. In terms of development trend, Guangdong's economic growth is expected to be better than the previous year.

Major features of Guangdong's economy

Firstly, the industrial production was accelerated with its leading role in national economy further improved. In the first quarter, the total value-added of the industrial sector was 110.55 billion yuan, up by 18.8 per cent, which was 1.9 percentage points quicker than that in the January--February period of this year or 5.3 percentage points higher compared with the figure over the same period of last year, representing the highest growth quarter-to-quarter since 1998. The industrial sector contributed 57.7 per cent to the total GDP growth, or 7.5 percentage points to push forward the economic growth with an increase of 1.3 percentage points over the precious year.

The factors to accelerate the industrial production included: First, the growth of all types of economic ownerships was quickened. Of this total, the fastest growth was registered in the enterprises invested by foreigners or investors from Hong Kong, Macao and Taiwan and the share-holding enterprises, up by 19.7 per cent and 17.5 per cent, or 6.5 percentage points and 7.4 percentage points higher than that in the previous year respectively. Second, remarkable achievement was made in machinery and equipment sector and fast growth was scored in newly key industries. The output values of transportation equipment, special equipment manufacturing and metal manufactured products increased by 31.4 per cent, 27.1 per cent and 25.9 per cent respectively. And a growth of 29.6 per cent, 25.1 per cent and 22.5 per cent was seen in the output values of telecommunications facilities, computers and other electronic equipment, electric equipment and machinery, and raw chemical materials and chemical products respectively. Third, the growth was promoted by both domestic and overseas demands. In the first quarter, the output value of domestic sales of manufactured products topped 235.25 billion yuan, up 20.3 per cent, which contributed 56.0 per cent to the total output value of industrial sales, or 12.4 percentage points higher than the figure of last year on a quarter-to-quarter basis with a contribution of 12.0 percentage points to the sales of manufactured products. The value of manufactured products shipped for export stood at 166.58 billion yuan, up 23.1 per cent, or 9.6 percentage points higher than the previous year.

Secondly, investment increased significantly and sales of commercial houses was brisk. The total fixed assets investment in the first quarter was 68.85 billion yuan, up by 20.4 per cent, or 3.7 percentage points higher than that in the first three months of 2002. Of this total, the investment in capital construction was 23.38 billion yuan, up 34.2 per cent or 31 percentage points over the previous year; and that in technical updating and transformation reached 6.82 billion yuan, down 4.1 per cent. Analyzed by sector, investment in industry rose by 24.7 per cent to 13.96 billion yuan, which focused on telecommunications equipment and electricity. Investment in the tertiary industry maintained a quick growth of 19.8 per cent. Remarkable growth was registered in projects under construction and newly started projects. Obvious improvement was made in sources of capital. The source of funds in capital construction and technical updating and transformation was up 27.8 per cent, representing 4.7 percentage points higher than the figure of its investment.

Overall stability was seen in real estate development. Its investment in the first quarter was 22.15 billion yuan, an increase of 13.5 per cent, or down by 10.5 percentage points over the same period of last year. The sales of commercial housing was brisk with a value of 13. 09 billion yuan and floor space of 3,961,000 square meters, up by 25.7 per cent and 28.7 per cent, or 27.3 percentage points and 32.1 percentage points quarter-on-quarter higher than the preceding year respectively. In terms of the average sales price, the commercial houses were 81 yuan cheaper per square meter compared with the same period of 2002, which meant 3,304 yuan per square meter.

Thirdly, domestic market was stably brisk. In the first quarter, the total retail sales of consumer goods stood at 137.51 billion yuan, up l1.2 per cent, or 0.7 percentage points higher than that in the previous year. Of this total, the wholesale and retail industry above designated size was up 27.6 per cent with a more obvious trend turning for large-scale wholesale and retail enterprises. Consumption structure was gradually updated. The sales of commodities for housing construction and decoration grew by 69.2 percent; that of motor vehicles and telecommunications equipment, up by 40.3 per cent and 21.7 per cent respectively; and that of cosmetics for beauty and health care and traditional Chinese or western medicines, up by 41.4 per cent and 23.6 per cent respectively. As for resident consumption, it became more multiple, fashionable and brand-oriented. Steady development was achieved in catering market with a retail sales value of 22.88 billion yuan, up 10.3 per cent.

Fourthly, tremendous growth was registered in import and export. The value of export in the first quarter topped 30.51 billion US dollars, up 29.8 per cent, or 13.2 percentage points higher than that in the same period of 2002. Continuous improvement was made in the technologies of export-oriented commodities. The export of mechanical and electrical products and high-tech products increased by 38.3 per cent and 46.7 per cent respectively, accounting for 64.4 per cent and 30.1 per cent of the total export. Fast growth was kept in the exports of foreign-funded enterprises, private-run enterprises and collective owned enterprises, with a growth of 38.6 per cent, 171.2 per cent and 25.1 per cent respectively during the January-February period. Analyzed by destination, the exports to major trade partners including Hong Kong, the United States, European Union countries and Japan increased by over 26 per cent; and to the Middle East countries, over 39 per cent.

The import registered rapid increase. The value of import in the first quarter was 27.97 billion US dollars, up 36.6 per cent. The trade surplus reached 2.54 billion US dollars.

Fifthly, utilization of foreign capitals maintained good momentum. In the first quarter, the contracted foreign capitals and foreign capitals actually utilized stood at 3.32 billion US dollars and 3.04 billion US dollars, up by 57.9 per cent and 20.9 per cent over the same period of last year respectively. Of this total, the foreign capitals through foreign direct investment were 2.90 billion US dollars and 2.56 billion US dollars, up 68.6 per cent and 30.4 per cent respectively. Regional structure of utilization of foreign capitals was optimized. The real investment in Guangdong made by the developed countries including the United States, Germany, the United Kingdom and Canada was 1.1 times to 10.8 times as much as that from a year earlier. Big projects invested by foreigners increased continuously. A total of 97 projects were newly approved and invested with a net value of more than 10 mi11 ion US dollars, 36 more than the figure of the previous year, accounting for 55.2 per cent of the total contracted foreign capitals.

Sixthly, the growth of the loans in financial institutions was obviously quickened and the electricity consumption increased by a large margin. At the end of March, the loans in Renminbi in various forms in financial instructions (excluding foreign-funded enterprises) totaled 1,603.09 billion yuan, an increase of 67.47 billion yuan over the end of the preceding year, up by 19.2 per cent or 8.6 percentage points quicker than the same period of 2002. Its increased value and growth rate became the highest level since 1999. In the first quarter, the total electricity consumption rose by 18.0 per cent, of which the consumption for industry was up 17.5 per cent, representing an increase of 9.5 percentage points and 9.0 percentage points respectively on a quarter-to-quarter basis. The elasticity coefficient of electricity consumption was 1.38, which presented the good momentum of the ongoing economic development from one aspect.

Seventhly, obvious improvement was made in quality and efficiency of economic performance. A good linkage was seen between industrial production and sales. The total output value of industrial sales stood at 401.83 bi11ion yuan, up 21.5 per cent, or 12.6 percentage points higher than that in the same period of 2002. The sales ratio of industrial enterprises was 97.0 per cent, representing a historical high level. Economic efficiency made further improvement. During the January-February period, the overall efficiency index for industrial enterprises above designated size was 133.7, or 11.2 percentage points higher in comparison with the figure of the same period of the previous year. After deducting losses from gains, the total volume of profits reached 10.83 billion yuan, up 41.9 per cent, or 6.7 percentage points quarter-to-quarter higher than the previous year. The loss value of loss-making industrial enterprises was down by 6.3 per cent.

The increase of farmers' income turned for better trend. Preliminary statistics indicated that the per capita net income of rural residents was 1,106 yuan, an increase of 70 yuan on comparable basis, up by 6.7 per cent or 2.2 percentage points higher than that in the same period of 2002. Of this total, the per capita income of rural employed migrants was up 23.3 per cent and the per capita income in wages form was up 16.0 per cent, which became the main factors to increase their income.

The annual per capita disposable income of urban residents was 3,687 yuan, up 9.7 per cent, representing the same level of the previous year.

Financial situation kept stable. The local budgetary fiscal revenue totaled 30.18 billion yuan, an increase of 16.5 per cent quarter-to-quarter from a year ago on comparable basis, of which the value added tax was up by 22.7 per cent. The local budgetary fiscal expenditure was 27.72 billion yuan, up 23.7 per cent, of which the expenditure for production and construction was up by 35.4 per cent, promoting the fast growth of Guangdong's economy.

Eighthly, business climate went up continuously and decline trend of prices was preliminarily under control. The production and management confidence of entrepreneurs was strengthened. The overall business climate stably turned for better trend. In the first quarter, the entrepreneur confidence index in Guangdong was 130.4, 4.8 percentage points higher than that in the fourth quarter of 2002, representing a new high in the recent 4 years. The business climate index was 131.5, up 1.0, of which the index for the key state enterprises in Guangdong was 151.4, up by 5.6.

The total price level in the first quarter kept the same as that of the previous year. The general consumer price index was 100, resulting in a zero growth. The consecutive decline trend of prices in recent years was preliminarily under control. Analyzed by category of main commodities, the prices of food and housing registered an increase, up by 0.2 per cent and 4.5 per cent respectively, and the prices of tobacco and liquor and goods maintained the same level.

All in all, under the unfavorable external environment of turbulent world situation and continuous slowdown of global economy, Guangdong's economy in the first quarter of this year still saw a good beginning. The major economic indicators maintained fast growth and a new high were scored in economic growth in recent years. The vitality of micro economy and its capability to follow the changing market was further strengthened. Obvious improvement was achieved in economic efficiency and quality, laying a good foundation for the economic development of the whole year.

Several Noticeable Problems

Under the situation of sharper domestic competition and complicated world, Guangdong confronts some prominent problems in its economic performance. In brief, there are "one difficulty, one slowness and one challenge".

Firstly, the difficulty in expanding exports obviously becomes tougher. First, the uncertainties including the Iraqi war and fluctuations of petroleum prices slow down the recovery pace of world economy, bringing about higher expenses for export shipment and insurance premium and hindering the foreign trade channels with less orders. Such will exert a negative influence on Guangdong's future export. Second, the lagging export rebate retards the expansion of export, which directly restricts the further growth of exports of enterprises. Third, the fact that the tremendous growth of 2002 resulted in a fairly large base figure will make it difficult to maintain high increase following the high growth of 24.1 per cent of last year. Finally, the severe acute respiratory syndrome (SARS) might produce some impact on the export.

Secondly, the sales in rural market grow slowly. In the first quarter, the sales in rural market increased 8.5 per cent on an annualized quarter-to-quarter basis, 1.9 percentage points slower than that in the previous year. Compared with the growth rate of the urban sales, the gap rose 3.7 percentage points from 0.1 percentage points of a year earlier. The retail sales of consumer goods in rural market were only 38 per cent of the urban total.

Thirdly, constantly high level of petroleum and raw materials prices hinders further improvement of efficiency of enterprises and electricity supply of our province. Under the effects of the Iraqi war, the prices of petroleum products in domestic and overseas markets jump quickly. In the first quarter, the ex-factory prices for crude oil recovering products grew 70 per cent and those for oil refining products rose 34 per cent on a quarter-to-quarter basis. Following the increase heat of domestic investment, the purchasing prices for raw materials, fuels and power were markedly higher than the ex-factory prices for industrial products. The purchasing prices for raw materials, fuels and power were up 2.8 per cent in Guangdong and even up 4.6 per cent in China, whereas the ex-factory prices for industrial products were only up 0.01 per cent in Guangdong. With a typically processing industry, Guangdong depends on import of raw materials. Its crude oil consumption takes up one third of the total energy consumption. The continuous high price of petroleum will undoubtedly raise the production costs of different sectors especially those downstream industries and shrink the profit-making margin of enterprises. The effects of electricity generated by fuels will intensify the situation of Guangdong's power supply. In the mid-March, the power load of Guangdong was close to the highest load capacity of the previous year.

Forecast of Economic Growth

Judged by the international and domestic environments, the economic growth trend of Guangdong in recent years and three demands of the economic development, a better-than-last-year economic growth will be expected in Guangdong.

In order to maintain the sustained, fast and healthy economic growth, Guangdong must focus on the macroeconomic controls as follows:

• Learning from its opponents. Quick development should be achieved in the medium and small-sized enterprises and non-state-owned enterprise. More attention needs be paid to the construction of infrastructure "bottleneck" projects and the expansion of internal-source economy.
• Focusing on modern industrialization. The industrial restructuring should be accelerated and the brand strategy should be implemented. The independent capability of scientific and technological innovation must be strengthened to push forward the reserve strength of economic growth.
• Continuing to attach great importance to work relating to agriculture, rural areas and farmers. Guangdong should speed up the construction of urbanization. Further steps should be taken to help the poverty-stricken households out of the difficulties in their production and 1ife.
• Optimizing the investment environment and promoting the level of utilization of foreign capitals. The domestic and international markets should be further expanded. Continuous efforts need be made to promote the added value and technological contents of products shipped for export and push forward the external-source economy. Given the current situation, it is necessary to grasp the possible after-war opportunities of foreign trade while coping with the effects of the Iraqi war.
• Accelerating the process of modernization in the Pearl River Delta. Efforts should be strengthened in the infrastructure construction of the mountainous areas and eastern and western regions to sharpen the overall competition edge of the whole province.

（Wing）

By:  Source：SouthCN