Latest statistics show that China's economy maintained steady growth in the first half of 2006, the starting year of the 11th Five-Year Plan period (2006-10).

 Economy is 'sound'

"The overall economic situation was good in the first half of the year and there had been some new positive changes," said an official of the National Development and Reform Commission (NDRC).

China's economy, featuring rapid growth, high efficiency, a high employment rate and low inflation, surged 10.9 percent year-on-year in the first half of 2006 and gross domestic product reached 9.14 trillion yuan, according to the National Bureau of Statistics (NBS).

The robust growth has demonstrated a sound economic situation for the country. Both the state and people had benefited more from this. State fiscal revenue rose 361.4 billion yuan; enterprises' profits were increased as well. Total profits of state-owned enterprises and non-state enterprises with annual sales of more than 500 million yuan hit 810.7 billion yuan, up 28 percent, 8.9 percentage points higher than the rate in the same period last year. The per-capita disposable income of urban residents reached 5,997 yuan. The actual growth rate was 10.2 percent, allowing for price rises.

The employment situation, an issue closely related to people's lives, improved in the first half of the year. About 6 million people were newly hired in cities and towns throughout the country, completing 67 percent of the annual goal set by the government at the beginning of the year. The growth rate of the consumer price index slowed down, ensuring a low level of inflation.

What is more encouraging is that the economic restructuring had brought positive changes. The progress of innovation among enterprises had speeded up. The output value of new products grew 28.5 percent in the first six months. Some high value-added industries, such as machine building and electronics, reported accelerating growth, up 6.5 percent and 7 percent, respectively. Investment in industries with overcapacity, such as cement, electrolytic aluminum and coking, began to decline.

As the "most important" factor in economic development, agriculture has become a highlight. The summer grain production had achieved a bumper harvest for the third consecutive year with the total output reaching 113.8 billion kg, up 7.4 billion kg from a year earlier. According to the NBS, farmers' per-capita cash income increased 11.9 percent over the same period last year.

Social welfare also developed. The National Middle- and Long-Term Science and Technology Development Plan had been formulated. The new compulsory education financial guarantee system began to take effect, which exempted 48.8 million rural students from all tuition and fees, and 370 million farmers were involved in the new rural cooperative medical scheme.

Flexible adjustments

The increase in prices of newly built houses slowed down, with 70 cities reporting a 3.3-percentage-point decrease in the growth of housing prices in the first months as a result of government regulation to curb the rampant growth in the sector.

Other macro control measures taken by the Central Government, including increasing agricultural investment, strengthening rural infrastructure and raising the bank loan rate, also played an important role in tackling the problems arising in the economic development.

A sum of 300 billion yuan was allocated to revitalize the countryside. According to Finance Minister Jin Renqing, 78.2 billion yuan was given in the form of transfer payments for the reform of rural tax and fee systems.

Another 12.5 billion yuan was earmarked by the government for grain growers this year to compensate for higher fuel prices and other production costs. The state continued to purchase wheat at guaranteed prices in response to declining prices on the market.

Thanks to effective supporting measures, the summer grain output increased by 7 billion kg and the per-capita cash income of farmers rose 12 percent. Agricultural experts said they reflected the government's preferential policies paid off. 
In response to torrid investment growth, the central bank raised its benchmark lending rate by 27 percentage points in late April and increased the required reserve ratio for commercial banks by 0.5 percentage points in July, "sending a warning to sectors with overheated investment," said Yi Xianrong, a researcher with the Chinese Academy of Social Sciences.

China raised its loan rate while the deposit rate remained the same, a more flexible measure not only to curb overheated investment but also to avoid having a negative impact on consumption.

"The increment of bank loans issued in June, for instance, was 70.6 billion yuan less than in the same period last year," aid Zheng Jingping, Spokesman for the NBS.

Oversight on land acquisition for non-agricultural purposes was tightened this year as well. A nationwide examination of newly started projects was carried out this year to see if these projects were abiding by government regulations and policies. The Ministry of Land and Resources maintained restrictions on land use right transfers and kept this year's land development quota on the same level as 2005.

Corresponding measures, including market and government controls, were taken to control overcapacities in such industries as cement, electrolytic aluminum, ferroalloy, calcium carbide and coal. Investment in cement, electrolytic aluminum, calcium carbide and ferroalloy reported a decrease of 0.8 percent, 1.8 percent, 2.4 percent and 20.9 percent, respectively, year on year.

Housing prices dropped after the Central Government tightened controls. More people were able to afford a house, and the blind enthusiasm for large housing and the tendency toward over-consumption were somewhat curbed.

Efforts had also been made to cope with other deep-rooted problems. Reforms in rural areas were deepened after the agriculture taxes were scraped. Mechanisms had been created to provide subsidies to the disadvantaged group in society. Financial reforms were pushed forward and the capital market developed in a healthy way.

"The government's accurate judgments of the economic situation, its timely acknowledgement of existing problems and its effective measures combine to guarantee fast and stable economic growth," said Zheng.

Lessons and opportunities

Unlike in the past, the economic growth in the first half of this year wasn't accompanied by rising prices and a shortage of coal and electricity. It was a more balanced and coordinated growth. Sticking to the scientific outlook of development is important. This year, all parts of the country, under the guidance of the scientific outlook of development, took active efforts to revitalize the rural areas, promote industrial restructuring, encourage innovation, and protect the environment and save energy, which has laid the groundwork for the development in the second half of the year.

According to Qiu Xiaohua, head of the National Bureau of Statistics, this year's macro control contributed a lot to the economic development as it was employed in the right direction, at the right time and with the right force.

The impetus of economic growth can be stimulated only if the market economic system is improved. By giving full play to the role of the market in the government's macro control, the economy maintained rapid growth without large fluctuations, said Cai Zhizhou, a researcher with the Center for National Accounting and Economic Growth at Peking University.

Prominent problems, however, still existed, such as the increasing difficulty in increasing farmers' incomes, excessive investment in fixed assets, an oversupply of credit and a tepid employment market.

On the other hand, there are favorable conditions for China's economic development. According to Shi Gang, an official of the NDRC, there will be no big change in the world economic outlook, and stimuli for China's growth at both domestic and international markets remain strong. Therefore, efforts must be made to solve key problems in the economy so that China can keep growing quickly but in a stable and coordinated manner.

Looking at the second half of this year, as long as we continue to earnestly implement various policies set by the Central Government, continue to strengthen and improve macro control measures, adopt an accountability system to tackle the prominent problems, speed up economic restructuring and change the mode of economic growth, the national economy will show fast and stable growth for the whole year.

(China.org.cn)