This figure indicated a turn-around from a slowdown in economic growth over the past two years, local economists said, adding that the economy was likely to pick up speed in the second half of the year.

China's economic growth dropped from 8.1 percent in 2000 to 7.3percent in 2001. In 2001, the growth rate at the end of the year was 0.8 percentage points slower than in the first quarter.

Official statistics showed the slowdown had been narrowed to only 0.1 percentage points by the end of June as compared with the growth rate of 7.6 percent in the first quarter of this year.

Li Mingliang, an analyst with the China Haitong Securities Research Institution, said as the world economy recovered in the latter half-year, China's policy of expanding domestic demand would gradually take effect and boost economic growth further.

Investment in fixed assets

Local analysts attributed the rally in economic growth to increases in investment, exports and consumption.

The increase in investment in fixed assets is still the major driving force of the Chinese economy. Statistics showed that investment in fixed assets grew 25.8 percent year-on-year in the first five months of the year, some eight percentage points faster than in the same period last year.

Government investment played a major role in boosting fixed asset investment as China continued to carry out a pro-active fiscal policy this year.

Exports

Minister of Foreign Trade and Economic Cooperation Shi Guangsheng said exports and foreign direct investment grew faster than expected in the first half-year.

Statistics from the Chinese Customs showed that exports grew 14.1 percent year-on-year and trade surplus soared to 13.41 billion US dollars in the first six months of the year.

Local economists said the increase in exports was mainly due to the recovery of the world economy and the policies adopted by the Chinese government to stimulate exports in terms of financing, taxation and industrial restructuring.

Foreign direct investment

Foreign direct investment (FDI) in the first six months rose 18.69 percent year-on-year to 24.58 billion US dollars. A large proportion of the FDI went to such projects as high-tech enterprises, infrastructure construction and environmental protection, greatly promoting China's industrial restructuring andits capability for sustainable development.

The growth of China's economy showed that government policy to expand domestic demand had paid off, economists said. In the first half-year, governments at various levels have abolished hundreds of rules or regulations restricting domestic investment and consumption. The country's legislature passed a law promoting small and medium-sized businesses.

Expansion of domestic consumption

As a result, growth in retail sales surged to a record high of 9.3 percent in May. Emerging bright spots in consumption such as housing, automobiles and tourism helped push up investment and industrial production.

The National Bureau of Statistics (NBS) said growing housing demand had led to the rapid expansion of real estate development. During January to May, investment in real estate development rocketed up 36.7 percent year-on-year, leading all sectors of fixed asset investment.

Strong domestic demand also promoted the production of automobiles and electronic telecommunication products, which in turn drove up industrial output for the whole country. Automobile output soared 46.8 percent in the first half-year, while the number of personal computers rolling off production lines was nearly three times the volume in the corresponding period last year.

Since June, adjustment of government policies has helped the stock market shake off the doldrums of the past 12 months. The NBS predicts that with the rebound of the Chinese stock market, consumer and business confidence indexes will rise to new highs since last September. The increased confidence will help promote investment and consumption in the latter half of this year.

(People's Daily July 12, 2002)