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Not a bad start for growth
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China's slowest quarterly growth in the past 10 years looks much like a dark cloud that features a silver lining offering a brighter future for the national economy.

Latest statistics show that China's economy expanded by 6.1 percent year-on-year in the first quarter of this year, 4.5 percentage points lower than the first quarter of last year and down 0.7 percentage points from the previous quarter.

Compared with its 9 percent growth for all of 2008 and a 13 percent gain in 2007, the Chinese economy has indeed slowed far below its long-term growth trend. Yet, given recessions in economies around the world as the global financial and economic crisis worsens, it is no exaggeration to claim that the overall national economy has showed positive changes, with better performance than expected, in the first three months this year.

Of course, it is still too early to conclude that such a lower-than-expected quarterly growth figure has marked the low point for the world's third-biggest economy, though many observers believe so.

However, if most of the positive structural changes that are taking place in the Chinese economy can be brought into full play, the country will surely be well positioned to embrace a speedy and sustainable recovery.

Unsurprisingly, growth in industrial production and investment has considerably accelerated to help stabilize the economy. Industrial production jumped 8.3 percent in March from a year earlier, up from 3.8 percent in the first two months, and urban fixed-asset investment surged 30.3 percent in March. These numbers add to evidence that the country's 4 trillion yuan (US$585 billion) stimulus plan is working as expected.

There are many positive structural changes concerning these numbers of growth.

Faster industrial growth in poor areas is helping narrow the country's regional development gap. Western, central and eastern areas witnessed industrial growth of 11.8 percent, 5.2 percent and 3.7 percent respectively in the first quarter.

Meanwhile, the structure of urban fixed-asset investment has been improved as investment growth in the agricultural and service sectors both outpaced that in the industrial one.

More encouragingly, retail sales grew 15 percent to 2.94 trillion yuan (US$430.4 billion) in the first quarter, laying a solid foundation for the country to wean itself from excessive dependence on investment or export for growth.

On the one hand, steady income growth is supporting consumption. The per capita disposable income of urban residents rose 10.2 percent to 4,834 yuan for the first quarter. That of rural residents also climbed 8.6 percent to 1,622 yuan.

On the other hand, tax reduction and fiscal subsidies are working their magic on boosting consumption. The tax cut for car purchases has enabled automakers to sell more cars so far this year in China than in any other country. The fiscal subsidies for rural consumers also significantly spurred their demand for home appliances.

If consumption can be further boosted into a major growth engine, China will eventually step out of the global crisis with a much more sustainable growth model.

(China Daily April 17, 2009)

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