-- A REVIEW OF GUANGDONG'S ECONOMY  IN THE FIRST HALF OF 2005

Guangdong's economy enjoyed a stable development in the first half of 2005. The provincial GDP for the first half of 2005 was more than 890 billion RMB, an increase of 12.6 percent over the same period of last year.

At the 2005 Guangdong Economic Analysis Conference in July, Huang Huahua, Guangdong Provincial Governor, said Guangdong's economic development was healthy and brought benefits to businesses and the public alike.

Guangdong's economic growth slow-ed to 12.2 percent in the first quarter of this year compared to its growth of 15 percent in the same period last year and 14.2 percent in 2004. In the second quarter, Guangdong suffered from the worst case of flooding in 100 years. Faced with a slow economy and un-favorable weather conditions, the province adopted a series of measures to both spur economic growth and provide sufficient disaster relief to areas that had suffered from floods.

GROWTH PERFORMANCE

Despite a severe drought which lasted from the autumn of 2004 to the spring of 2005 and severe flooding in the summer, the province's agricultural output reached 74.45 billion RMB, an increase of 4.3 percent, 0.3 percentage points higher than the second quarter of the previous year.

Foreign trade volume grew by 17.5 percent to 187.05 billion USD, while foreign direct investment surged 21.9 percent to 5.63 billion USD.

Guangdong's retail sales of commodity goods were 352.65 billion RMB with an increase of 14.7 percent. A prosperous local market was the main drive behind the province's economic growth.

Input into infrastructure and key pro-jects increased to 93.485 billion RMB, or 34.9% of the total investment of the province. The industrial sector continued to promote the development of a heavy and high value-added industry. Heavy industry generated 18.1 percent growth in the past six months, surpassing light industry's 16.6 percent growth rate.

The economic growth of mountainous areas and counties increased 22.6 percent in industrial added value, 5.5 percentage points higher than the average growth rate of the province.
Growth of local governments' fiscal revenue, excluding export tax-refund factors, saw a four-year-high rate of 20 percent.

Progress continued in other sectors including science, education, culture, sanitation and sports. The employment climate improved and the number of people joining social insurance in-creased.

WEAK POINTS

Guangdong remained significantly stronger than the national average in the first half of this year but there were still challenges and negative factors in this south China province's economy.

The momentum of Guangdong's economic growth was weaker than that of many other provinces and regions in China.

The shortage of energy resources including coal, electricity and oil were an obstacle to the province's healthy development.

The growth of industrial output and enterprises' profit slowed down significantly.

Relief work in flood-affected areas was tough and there are expected to be little growth in the agricultural sector and peasants' income.

The Pearl River Delta, the core of Guangdong province, witnessed a drastic decrease in GDP growth rate, while the mountainous areas and the eastern and western parts of the province failed to yield breakthroughs in economic development.

Governor Huang said the problems Guangdong was facing are rooted in the weak points of Guangdong's economy, including economic growth mode, innovation, technology and potential for future development.

Huang asked local governments to focus on these areas: optimizing the industrial structure, changing the economic development mode, and exploring new sources to drive economic growth.

TASKS IN THE SECOND HALF OF 2005

According to Huang, ten points topping the government's agenda in the second half of 2005 will be:

1. To continue the relief and re-building work in disaster-stricken areas,  provide families rendered homeless in the flood with new homes before this year's National Day, which will fall on October 1st, and to improve Guangdong's capability in disaster prevention and relief.

2. To accelerate local counties' economy development and find solutions to the agricultural challenges for local farmers.

3. To increase fixed asset investment and direct such investment towards infrastructure construction and technological development.

4. To enhance the province's innovation capability and optimize the industrial structure. The province will support Guangzhou and Shenzhen to improve their R&D capability. Guang-dong, with a long coastline and fast-developing petrochemical industries in Huizhou, Guangzhou, Shenzhen, Zhuhai and other coastal areas in west and east parts of the province, will take steps to develop a petro-chemical in-dustrial chain.

5. To take steps to balance the development of domestic- and foreign-oriented economies and enhance the province's economic power.

6. To solve emerging challenges in economic development by making e-ffort to ease the energy thirsty in coal, oil and electricity, stabilizing the consumer price index and improving the financial environment. To clear up the cases of unpaid project payments and salaries. The government will also pro-mote safe production and construction methods.

7. To develop the recycling economy and promote the concept of energy conservation among the public.

8. To improve the government's financial management capabilities and to implement and enforce standardized tax and financial management legislation.

9. To continue the ongoing economic reforms in administrative management, a monitoring system for state-owned enterprises and state-owned capital investments, the acceleration of the local governments' financial reforms and improvement of the local market environment.

10. To continue social development projects.

Editor: Yan