National Economy in the First Three Quarters and Prospect into Next Year

In the first three quarters, the national economy kept fast and sound growth continuously, the general situation was obviously better than expected and also than last year. According to preliminary prediction, the national gross domestic product will jump onto a new stage of ten trillion yuan, a year-on-year increase of 7.8 percent.

First, the national economy showed a rapid and sound development continuously.

According to preliminary calculation, the gross domestic product in the first three quarters reached 7168.2 billion yuan, up 7.9 percent year-on-year calculated at comparable price and 0.3 percentage point faster in growth rate year-on-year, of which, the value-added of the primary industry was 895.9 billion yuan,  up 3 percent; that of the secondary industry was 3816.8 billion yuan, up 10 percent; that of the tertiary industry was 2455.5 billion yuan, up 6.6 percent. The national economy presented a trend of fast and healthy growth continuously. The main indicates were the followings:

The stability of economic growth was strengthened to some extent.

From dynamic perspective, the economic growth got rid of the inertia of ¡°first high later low¡± in the previous years and climbed up steadily quarter by quarter. The GDP in the first quarter increased by 7.6 percent, that in the second quarter rose by 8 percent, that of the third quarter grew 8.1 percent. Other main economic indicators showed the trend of climbing quarter by quarter. The value-added of the industry above designated size was up 10.9 percent in the first quarter, up 12.5 percent in the second quarter,  up 13.1  percent in the third quarter; the retail sale of consumer goods rose by 8.4 percent in the first quarter, went up 8.7 percent in the second quarter, and gained 8.8 percent in the third quarter; the export went up 9.9 percent in the first quarter, up 17.9 percent in the second quarter, up 28.7 percent in the third quarter. This indicated that the foundation of economic growth has been reinforced to some degree and the inner vitality tends to be strengthened.

Domestic and outer demands all went up .

The investment in fixed assets grew rapidly. In the first three quarter, the total investment in fixed assets was 2583.8 billion yuan, up 21.8 percent year-on-year and 6 percentage points more than the growth rate of the same period of last year. Of the total, the investment in fixed assets from state-owned and other ownership types of enterprises rose by 24.3 percent, 6.1 percentage points higher in growth rate year-on-year; that from collective-owned and individuals was up 18 percent,8.9 percentage points more in growth rate. Among the fixed assets investment from state-owned and other ownership types of enterprises, the investment in capital construction was 1042.1 billion yuan, up 24.6 percent and 12.9 percentage points faster in growth rate; that in real estate development was 486.3 billion yuan, up 29.4 percent and 2 percentage points less in growth rate year-on-year;  that in innovation was 367.6 billion yuan, up 16.3 percent and 7.8 percentage points less in growth rate. Analyzed by region, the investments in the eastern, central and western regions basically grew in the same pace. Of them, the investments in the eastern and central region showed a higher speed that were 22.9 percent and 25.3 percent year-on-year; that in the western region rose steadily, an increase of 25.2 percent.

The consumption grew steadily. Under the condition of more rapid economic growth, the policies such as raising household income, strengthening social security, reducing burden of peasants produced the effective result. The income of residents kept fast increase. In the first three quarters, per capital disposable income of urban residents was 5793 yuan, deducting price factor, a real increase of 17.2 percent; per capital cash income of peasants was 1721 yuan, a real increase of 5.3 percent. Household income increased and consumption hot spots such as housing, auto and so on formed gradually, resulting in consumption growth. In the first three quarters, the retail sale of consumer goods was 2911.1 billion yuan, up 8.7 percent  year-on-year and a real rise of 10.2 percent considering price factor, so keeping the same level with the same period of last year. Of the total, the retail sale of consumer goods in urban area was 1848.8 billion yuan, up 9.8 percent; that in rural area was 1062.3 billion yuan, up 6.8 percent. According to the retail sale statistics of the wholesale and retail trade above designated size, in the first three quarters, the sales revenues of telecommunication equipment and autos rose by 62.4 percent and 58 percent respectively. According to statistics on real estate investment, the sale of commercial houses grew by 31.9 percent, of which, the houses sold to individuals increased by 33.5 percent, accounting for 91 percent of the total of sold houses.

The foreign trade showed a fast increase. In the first three quarters, total value of import and export was 445.1 billion        US dollars, up 18.3 percent and 9.3 percentage points faster in growth rate year-on-year. Of the total, the export reached 232.6 billion US dollars, up 19.4 percent and 12.5 percentage points more in growth rate; the import was 212.6 billion US dollars, up 17.2 percent and 5.9 percentage points higher in growth rate year-on-year. After the export was offset by the import, the accumulated surplus was 20 billion US dollars, up 6.6 billion US dollars. In the total export and analyzed by country and region, the export to Europe, USA and South-eastern region climbed, of which, the export to Europe Union rose by 13.8 percent, up 7.9 percentage points in growth rate year-on-year; that to USA was up 24.5 percent,  19.7 percentage points faster in growth rate;  that to the Association of Southeast Asian Nations rose by 27.4 percent, 21.4 percentage points higher in growth rate year-on-year; that to Hong Kong grew by 25.2 percent, 22.3 percentage points faster in growth rate; that to South Korea was up 19.9 percent, 8.5 percentage points more in growth rate; but the export to Japan was only up 4.9 percent, 5.1 percentage points less in growth rate year-on-year.

The structure adjustment made new progress.

Aiming at enhancing agricultural benefit and peasants¡¯ income, the agricultural production expanded the total outputs as well as steadily advanced structure adjustment and further strengthened the function of market adjustment in the development of agriculture. The sown area of grain continued to reduce; the proportion of high-quality agricultural products was elevated, according to the information from related department, the sown area of high-quality rice has surpassed 50 percent of total area of rice and the sown area of ¡°double-low¡± rape accounted for 56 percent of the total area of rapeseed; the regional distribution was further optimized and formed the pattern that rape and rice are raised in the drainage area of Yangtze,  wheat and peanut are raised in the area of Huang Sea and Huai Sea and soybean and corn are planted in the north-east region, Hebei, Shandong and Henan. Though the outputs of summer grain and early rice declined, however, attributed to favorable climate conditions, the autumn grain showed a good harvest. The outputs of grain in the whole year was predicted to be 915 billion jin, up 1.1 percent, of which, the output of summer grain was 197.5 billion jin,  down 2.9 percent, that of early rice was 60.5 billion jin, down 11 percent; that of autumn grain was 657 billion jin, up 3.8 percent. Among main economic crops, the output of cotton was predicted to be 4800 thousand tons, down 9.8 percent; that of oil crops was forecasted to be 28 million tons, down 2.3 percent; that of sugar materials will be 91.84 million tons, up 6.1 percent. The animal husbandry and fishery continued to rise steadily and the outputs of meat and aquatic products all kept the growth.

The industrial production grew more rapidly and steadily and the industrial

structure adjustment step up. The production of export-oriented, investment-oriented, high-technology-oriented and consumption-upgrade-oriented products kept faster growth and promoted the stable and faster growth of the whole industrial production. In the first three quarters, the national industrial value-added from the industry above designated size was 2248.7 billion yuan, up 12.2 percent and 1.9 percentage points faster in growth rate year-on-year. Of the total,  the value-added from state-owned and state share-holding enterprises was 1199.1 billion yuan, up 10.8 percent and 1.7 percentage points faster; that from collective-owned enterprises was 200.2 billion yuan, up 8.8 percent and 1.9 percentage points higher in growth rate; that from share cooperative enterprises was 819.2 billion yuan, up 13.5 percent and 2.4 percentage points in growth rate; that from joint-venture enterprises was 576.6 billion yuan, up 12.7 percent and 0.4 percentage points more in growth rate. Heavy industry grew more rapidly than light industry. In the first three quarters, the value-added of heavy industry was 1368.7 billion yuan, up 12.3 percent year-on-year; that of light industry was 880 billion yuan, up 12 percent. Six big industries such as electronic communications equipment manufacture, transport equipment manufacture, chemical industry, electrical machinery and apparatuses manufacture, metallurgy and textile were the main power driving the growth of industry. In the first three quarters, the above six industries presented a contribution rate of 53.2 percent to the growth of industry above designated size. The export showed a sustained rising. In the first three quarters, the value of industrial products exported and delivered wan 1391 billion yuan, up 21 percent and 12.2 percentage points year-on-year.

Quality of economy running has improved to some extent.

The industrial benefit improved little by little. The industrial enterprises obtained profit, changed the situation  of decline at the beginning of this year and reinforce the better condition. The industrial production grew with a continuously increased speed and the condition of production and sale tended to be good. From Jan. to August, after the profit was offset by the loss, the net profit of industrial enterprises was 324.6 billion yuan, up 10 percent and 4.9 percentage points higher in growth rate over the first half of this year. Of the total, the net profit of state-owned and state share-holding enterprises was 152.6 billion yuan, down 4.1 percent and 7.1 percentage points less in growth rate over the first half of this year. The loss of loss-making enterprises showed a declining increase. From Jan. to August, the loss of loss-making enterprises was 83.6 billion yuan, up 1.9 percent and 7.9 percentage points lower in growth rate over the first half of this year. Of the total, the loss from state-owned and state share-holding enterprises was 50.3 billion yuan, down 1.1 percent changing from up 1.1 percent. In the first three quarters, the proportion of industrial products sold was 97.6 percent, up 0.41 percentage points year-on-year.

Government revenue continued to grow. In the first three quarters, the government revenue rose by 10.9 percent year-on-year, slightly higher than the budgetary level, 7.5 percentage points more over the first quarter and 1.7 percentage  points more over the first half of this year in growth rate.

Supply of currency grew faster. At the end of September, the balance of broad money was 17698.2 billion yuan, up 16.5 percent and 3 percentage points more year-on-year; the balance of money in narrow sense was 6679.7 billion yuan, up 15.9 percent and 3.7 percentage points more in growth rate; that of money in circulation was 1623.4 billion yuan, up 7.8 percent, 0.7 percentage point less in growth rate. In the first three quarters, the loans of financial institutions increased by 1353.3 billion yuan over the beginning of this year, 415.1 billion yuan more in the growth year-on-year. Of the total, the short-term loan rose by 608.9 billion yuan, 307 billion yuan more in the growth; the medium- and long-term loan increased by 554.4 billion yuan, 111.6 billion yuan more in the growing amount. All kinds of deposits were up 2253.5 billion yuan, 689.8 billion yuan more in rising amount year-on-year, of which, the deposit from enterprises was up 640.2 billion yuan, 170.1 billion yuan more in the growth year-on-year; that from residents went up 1046.1 billion yuan, 351.3 billion yuan more in the growth. Until the end of September, the balance of deposit saving of residents reached 8413.9 billion yuan. In the first three quarters, the accumulated net supply of money was 54.5 billion yuan, 13.3 billion yuan more in the rise. 

The continuous, rapid and sound development of the national economy in the first three quarters attributed to the combination of policy effect and market drive and the mutual function of domestic and international factors:

1.Adhereing to the basic policy of expanding domestic demand and continuously carrying out proactive financial policy and sound money policy were the important assurance of the stable growth of the economy in this year.  The fund from treasury bond about 150 billion yuan was appropriated and delivered ahead of time, the speed of appropriating fund was obviously enhanced, the related fund followed timely, the above measures set up a good example and play an important role in leading, thus driving the fast rise of investment. In the first three quarters, among the investment in fixed assets from state-owned and other ownership types of enterprises, the budgetary fund increased by 48.8 percent, far exceeding the growth rate of other fund source. In the course of continuing to implement the sound money policy, the government lowered the loan interest rate at the suitable time, enforced the window instruction to commercial banks and elevated the speed of money supply, and these measures better promoted the growth of economy.

2. The moderate recovery of world economy and depreciation of US dollar brought about the fast growing of Chinese export. Though the recovery condition of world economy was not so good as expected, it has enter into the passage of slow upturn, especially the economy of the neighboring countries and regions of China recovered more rapidly. Since March, US dollar depreciated continuously and the exchanged amount of Renminbi to unit main foreign currency declined correspondingly, thus the export competitiveness of our products was enhanced. According to calculation, there were contribution of 2.5 percent from the export in the growth of 12.2 percent of the industrial value-added above designated size, obviously higher than the level of 1.1 percent rise in the same period of last year.

3.After China¡¯s entry into WTO, more open and multi-dimension market expanded the space of economy. According to the condition of this year, the opposite benefit from China¡¯s access to WTO outstripped the minus effect. On one hand, due to lagging period of quote management in actual operation, the impact of lowering tariff to some products was less serious than  expected, on the contrary, lowering tariff brought about the decline of the cost in importing advanced technological equipment and sped up the process of the adjustment of industry structure. On the other hand, the attitude of further opening toward world strengthens the confidence of foreign investors to Chinese economy. The foreign capital showed a new historical record in growth rate. In the first three quarters, the direct contracted investment from foreigners reached 68.4 billion US dollars, up 38.4 percent year-on-year and 8 percentage points more in growth rate; the foreign investment actually used was 39.6 billion yuan, up 22.6 percent and 1.9 percentage points higher in growth rate. The export condition in foreign trade turned favorable with the China¡¯s entry into WTO.

4. The inner growing mechanism of economy was enforced to some degree.

Carrying out the policy of expanding domestic demand for five consecutive five years presented its effect gradually, the national economy was stepping onto the orbit of continuous and sound development and the inner growing power of economy was strengthened, embodied in the faster growth of non state-owned investment and the investment in the eastern  region. In the first three quarters, the investment from collective and individual rose by 18 percent, obviously faster than the rate of 9.1 percent of the same period of last year. The investment in the eastern region stepped up, reducing the difference with the investment rises of the central and western regions. At the same time, the adjustment of consumption structure sped up, the consumption of housing, auto and communications grew into a certain size and promoted the investment of related industries.

5.All the reforms advanced continuously, regulating the market order and breaking the monopoly brought more vitality to the growth of economy and the environment for economy improved. 

Since the beginning of this year, the restructure reforms of civil aviation, telecommunications, power and so on made remarkable progresses and micro-economic activities were enhance to some extent; gradually lessening the limit to civil capital expanded its investment space; regulating market order, transforming government function, continuously advancing the construction of capital markets such as stock market, bond and fund, the improvement of investing and financing and the smooth advancing of reform in rural taxes and fees  reduced the burden of farmers to some extent; the social community construction was enforced and the living environment and capability of low income in urban area was further improved.

However, there are still some problems existing in the progress such as great pressure in employment, continuous decline of price, repeat construction at low level in partial regions and so on. In dynamic perspective, some problems turned less serious in the third quarter but they showed no fundamental changes.

First, the pressure of employment is still great. Since the beginning of this year, the central government took many measures to promote employment and reemployment and made some effect. But due to the simultaneous existence of newly added labors, laid-off workers and surplus rural labor force, the total of employment is still great. In addition, because the power of adjusting structure is gradually enhanced, the number of long-term unemployed persons in urban area and temporary unemployment of high-education persons presented a rising trend. According to survey, the proportion of persons unemployed for over one year rose to 51 percent from 43 percent in 1998 and those laid-off are old, poor skillful and with low education, showing a poor capability for being re-employed and having more and more difficulty in finding a new job. The employment structure presented an outstanding contradiction. The unemployment problem not only affected the social security and stability, more importantly, the enlarging of unemployment size will further strengthen the contradiction of inadequate consumption demand and in turn affect the stable growth of economy.

2.The incessant decline of price has not been changed. Entering into the third quarter, the decline of price shrunk to some extent, the consumer price in this quarter declined by 0.8 percent on the average, down 0.2 percentage point over the second quarter; the price of industrial products decreased 1.8 percent, the purchase price of raw material, fuel and power was down 1.9 percent,  0.9 and 1.2 percentage points less over the second quarter respectively. However, the trend of continuous decline in price has not changed so far. To September, the consumer price has declined or kept unchanged for ten consecutive months, the ex-factory price of industrial products declined for 18 consecutive months, the purchase price of raw materials, fuel and power was down for 15 consecutive months. In this round of price decline, although there are some beneficial factors bringing some benefit such as the furious competition after breaking the monopoly, the productivity enhancement from technological advance, lowering import tariff, the stability of price in international market and so on. But the continuous decline of price will result in the reduction of expected return rate and affect the investment activities of enterprises, thus having a sequential influence on the expectation of employment and employees¡¯ income and consumption and possibly bringing about the slow growth of economy.

3. There were some signals of repeat construction at low level in some region. Only aiming at the speed of development  and carrying out economic developing strategy simply by administrative means are still popular in some regions, for example, constructing development district, industry park and introducing foreign investment (or fund from other provinces) are always completed by decided quote task, in addition, such task is committed to government staff in different department, especially the phenomenon that all kinds of development districts, industrial park, holiday village and high-class real estate projects are blindly constructed is common, the repeat construction at the low level began to increase in some region, and the small backward industries such as ¡°small textile¡±, ¡°small steel¡± and so on showed a signal of resurgence.