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China's macro economy experiencing "difficult time"
Latest Updated by 2006-06-27 09:18:14
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China's fixed asset investment, which cooled down a bit last year, has been growing rapidly so far this year, indicating that the country's macro economy is entering a "difficult time".

Official figures showed that China's fixed asset investment growth rate in May this year was 2.1 percentage points higher than that of the first quarter, and the trade surplus continues increasing.

China's economy will probably grow around 10 percent in the first half of the year, economists here predicted.

The National Bureau of Statistics said that in the first five months of this year, the investment of local governments, which made up about 90 percent of China's urban fixed asset investment, increased by 31.3 percent, up 2.5 percentage points from the same period a year ago.

A State Council meeting in mid-June has urged local governments to focus efforts on adjusting economic structure, changing growth patterns and deepening reforms.

The blind thirst for expanded investment and faster economic growth should be curbed, the meeting said.

Wang Tongsan, director of the Quantitive Economy Institute of the Chinese Academy of Social Sciences, told Xinhua that he believed China's current investment growth rate was "rather moderate" compared to that of 2003.

The macro economic situation is "not bad," he said, there were no "bottlenecks" in the sectors of coal, electricity, oil and transportation and the commodity price is "relatively low."

He warned, however, the central government should be on alert in regards of the rebounced overheated investment and adopt appropriate measures to curb the trend. Otherwise, this will affect the nation's economy to develop "fast and sustainably," he said.

China is determined to adjust the investment and consumption structure and aims to realize a balanced international trade and balance of payments during the 11th Five-Year (2006-2010) plan period.

The country also plans to upgrade the proportion of tertiary industry in the country's GDP and the reduce the per unit of GDP energy consumption by 20 percent in the next five years.

In January-May, China's fixed asset investment grew 30 percent, while consumption grew less than 15 percent. China's trade surplus amounted to 46.8 billion U.S, dollars.

If this trend continues, China's trade surplus this year is expected to surpass last year's record 101.2 billion dollars, economists said.

Wang said China's macro economic regulation and control should combine the resolve of short-term problems with the realization of long-term targets so as to stimulate the transformation of the growth pattern and realize the goal of sustained and fast development of the nation's economy.

As for the central bank's raise of the benchmark lending rates by 27 basis points in late April and the recent hike of reserve ratio for commercial banks by 0.5 percentage points, Wang believed these measures were not enough to curb the overheated lending.

He suggested a more relaxed and flexible interest rate and exchange rate policy in a bid to control credit and achieve a balanced foreign trade.

Meanwhile, he noted, the policy of tax rebate, which has been in place since 1998, should be adjusted.

He pointed out the root for China's economy to experience sharp ups and downs over the past years lies in the country's administrative managing system, which spurs local officials to seek after higher economic growth to get promoted.

Reforming China's administrative managing system and establishing scientific system to select officials is the fundamental way to solve China's deep-rooted economic problems, he said.

Editor: Yan

By: Source: China View website
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