Chinese Economy on Fast Lane

Guo Jian'er/Da Shan

China's economy will grow faster this year than last year due to the country's active fiscal policy, robust domestic demand and surging exports, a senior statistician said.

``We are optimistic about China's economic growth, although it is too early to say how much it will grow,'' said Ye Zhen, spokesman for the National Bureau of Statistics.

The Washington-headquartered World Bank predicted that China's gross domestic product (GDP) would grow 8 percent this year, up from 7.1 percent in 1999.

The Manila-based Asian Development Bank said China's GDP was expected to grow 7.5 percent in 2000.

"China's economy, which was affected by the Asian financial crisis and had been haunted by deflation in the past two years, witnessed an important turn growing 8.2 percent year-on-year during the first half of this year,'' Ye said.

The GDP growth was driven by domestic consumption, investment and export, he said, adding the three contributed 58.8 percent, 38.1 percent and 3.1 percent respectively to the growth.

"The economic performance in July and August was better than we expected,'' Ye said.

In August, exports soared 27 percent due to the recovery of the Asian countries, while a 55 percent rise in imports reflected a more active domestic economy in China.

In the same month, state investments in fixed assets rose 13 percent, as the government continued to pour money into the economy.

The retail sales, the main indicator of consumption, rose 9 percent in August from the same month last year, compared with a paltry 6 percent in the same month of 1999.

The consumer price index, a key inflation gauge, rose 0.3 percent in August from the same month last year.

"There are still many positive factors driving the country's economic development in the remaining months of this year,'' Ye said.

The recovery of world economy will continue to absorb more goods from China.

Meanwhile, the central government's policies to stimulate consumer spending will continue to play their role.

The central bank has cut the interest rate seven times over the past three years, slashing interest on one-year deposits to 2.25 percent.

A disguised interest rate cut in the form of a 20 percent tax on income from bank deposits was put in place last November.

The central government also took other measures, such as increasing salaries, providing compensation for laid-off workers and providing more pensions for retirees, to encourage spending.

As a further move to stimulate consumer spending, the government announced an extension of national holidays.

During the seven-day Labor Day holiday, a total of 45 million people traveled across the country, which generated 18.1 billion yuan (US$2.2 billion) in tourism revenue.

"Consumption will continue to be a major force for the country's economic development,'' Ye said.

According to Ye, the country's active fiscal policy plays an important role in GDP growth.

"The increased issuance of treasury bonds for state investment will not result in debt crisis,'' he said.

China's fiscal deficit amounted to 240 billion yuan (US$28.9 billion) in 1999, accounting for 2.8 percent of the year's gross domestic product (GDP), which is lower than the international practice of 3 percent.

The outstanding amount of domestic and foreign debts stood at 1,228.2 billion yuan (US$147.9 billion) at the end of 1999, accounting for 13.2 percent of the year's GDP, which is also lower than the international practice.

There is still room for the issuance of treasury bonds to increase state investment, he said.

(China Daily 10/08/2000)

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