--Review of Guangdong's economic situation in the first half year 2004

Thanks to the scientific development concepts and central government's macro-economic measures, Guangdong's economy has had rapid, rational development in the first half of 2004. An early estimate puts the gross domestic product(GDP)of Guangdong at 695.97 billion yuan, a 15.1-per-cent increase year-on-year, and a record increase for the past decade. GDP for the whole year is estimated to have a 14-per-cent increase, or well above the 9 per cent estimated at the beginning of the year.

Of this amount, primary industry (agricultural sector) accounts for 36.92 billion yuan, a 4.1-per-cent increase; secondary industrial (industrial sector) development accounts for 392.42 billion yuan, up 19.0 per cent; and tertiary industry, for 266.63 billion yuan, an 11.2-per-cent increase.

In his analysis of Guangdong's current economic situation, Governor Huang Huahua has emphasized that the province has seen an overall economic performance that exceeded expectations with its rapid, rational increase rate in the first half.

This rapid economic development is based on the continued expansion of both domestic and overseas markets, driven by Guangdong's efforts to upgrade the industrial sector, from light industry to heavy industry and from low value-added output to high value-added output. It has also developed its new economy in a scientific way. This indicates that the province is experiencing a new cycle of economic expansion.

At the same time, macro-economic controls like the tighter monetary policy and stricter controls on land use have proven to be effective. Market order was further standardized, with commodity price volatility being held within 3 per cent, which is considered rational.

The economic development has coincided with structural optimization and a better rate of return in the province over the past six months, proving that the central government's macro-economic control policies were both necessary and effective.

BEYOND EXPECTATIONS

The role of industry as an economic leader has continued to grow, according to the Governor.

The industrial sector contributed 67.5 per cent to economic growth for the period, an increase of 1.9 percentage points over the same period of last year. Industrial production has had fast growth as the industrial sector moved from being light-industry-dominated to heavy-industry-dominated, from low to high value-added. Heavy industrial growth has obviously been faster than that of 1ight industry. The added value of the heavy industrial sector was 178.58 billion yuan, up 25.2 per cent, or 6.4 percentage points faster than that of light industry.

The nine key industries have kept their momentum in growth, with added value of telecommunications, computers, and electronic equipment manufacturing hitting 71.55 billion yuan, up 36.8 per cent year-on-year.

The private sector has become an important force in the province's economic development. By the end of June, large-scale private industrial enterprises had a value-added output of as much as 49.344 billion yuan.

Agricultural development has also done its part in provincial economic development, with an estimated grain output this year of 14.45 tons.

Guangdong has been playing a leading role in China's foreign trade for many years, but now faces challenges from Jiangsu and Shandong provinces to the north. In the past six months, Guangdong's foreign trade was worth USD 159.29 billion, up 29.8 per cent from last year. But the growth was 10.5 per cent lower than the national average. Guangdong lost out to Jiangsu last year in the area of actual-used foreign direct investment, and suffered another defeat by Shandong in the first half of this year.

Guangdong's economic increases have been helped by both increased consumer spending and development in the eastern and western parts of the province, in the northern mountainous area. Consumption of items 1ike cars and housing continues to heat up. And consumer demand for health and telecommunications services is rising rapidly.

MACRO ECO-CONTROLS

The province's macro-economic controls have had good results. Various forms of loans and investment in fixed assets have increased, but at slower, controlled growth. Consumer goods prices increased at a reasonable 2.4 per cent in the first half.

Because of controls that began in July, 2003,the number of development zones in the province has fallen from 499 to 102 and the amount of land use has decreased sharply from 339,907 hectares to 101,708.

Although the macro-economic controls have indeed produced results, there are still some problems.

Most prominently, there is the bottleneck in electric power and other energy supplies, and the fairly large growth in the production costs and price of important consumer goods 1ike grain and edible oil.

There is also rather slow growth of provincial revenues, a rapid increase in industrial product inventories, and the growing menace to export growth from trade protectionism that cannot be neglected.

To maintain stable economic growth, Guangdong will need to implement a number of macro-economic control measures. And it is important that these measures and policies be kept under control to avoid fluctuations in the economy.

FORECASTING

If we take a look at the second half of the year, as macro-economic controls take effect, the growth in investment, industry and foreign trade will slow, while the economy as a whole will continue to increase. The development momentum will not change and provincial GDP for the year 2004 is estimated to be up by 14 per cent.

Guangdong will continue to implement the CEPA (Closer Economic Partnership Agreement), which was signed by the mainland, Hong Kong, and Macao.

It will also accelerate work on the Greater Pearl River Delta (Guang-dong, Hong Kong and Macao) and continue to cooperate with Hong Kong and Macao, especially in logistics, finance, tourism, customs problems, and large-scale infrastructure.

With the Pan-Pearl River Delta (Pan-PRD) economic bloc agreement in place, Guangdong will work hard with the other members in cooperating on transportation, energy, water conservation and environmental protection projects.

Editor: Yan