China's gross domestic product (GDP) rose 11.5 percent in the first half of 2007, according to Li Xiaochao, spokesman of the National Bureau of Statistics of China, explaining China's blistering economic performance over the past six months.
The country's GDP reached 10.68 trillion yuan ($1.39 trillion) in the first half, a growth of 11.5 percent, or 0.5 percentage points higher than that in the same period of 2006. Of the figure, the growth saw 11.1 percent in the first quarter and 11.9 percent in the second quarter. Foreign trade was boosted with a steady increase in the use of foreign capital. In the first six months, foreign trade totaled $980.9 billion, up 23.3 percent year on year. China's national economy, as Li said, continued to maintain a rapid growth, improved efficiency, harmonized structure and more substantial benefits for the masses of people.
Consumption: A Bigger Driving Force
China's economic boom was heavily reliant on investment in the past, said Li. Since 2007, however, some new changes have taken place when investment declined and consumption rose, indicating that consumption has contributed more to the country's economic growth. Li attributed this to the rapid increase of residents' income, which stimulated the fast growth of consumption demand. Governments at all levels have enhanced their investments in social securities, striving to solve problems concerning people's livelihood, such as education, medical care and housing. Residents are full of confidence in the country's future economic development and their consumption demands have been increasingly growing, propelling them to a new high.
Since China adjusted its foreign trade policy to increase export tariffs and cut refunds, a certain number of export companies endeavored to apply to customs before the July 1 deadline, resulting in a sharp increase of exports in June. It is expected to be restored to a normal level after the implementation of policies attempting to offset the trade surplus.
Investment: Rebound Pressure
When talking about the pressure caused by overheating investment, Li Xiaochao said that in the first half of this year, the investment in fixed assets witnessed a drop of 3.9 percentage points as compared with the growth in the same period last year, or 2.2 percentage points higher than that in the first quarter of 2007. Reasons are as follows:
First, the number of new projects declined. Under the macro policy control of new projects, the total planned investment in new projects has shown slow growth since 2006. In the first half of this year, the total investment involved in new projects grew by 6.4 percent. This is the second time that the investment has grown positively since May.
Second, excess liquidity has provided sufficient social funds for investment.
Third, increasing profits and promising profit prospects of some enterprises and industries have stimulated more enterprises to increase investment.
Fourth, investment in some industries with relatively low investment costs has increased.
However, Li is confident about the government's macro control policies, saying that, a full implementation of these policies will be very helpful to bring the growth rate of investment under control.
Price Hikes: An Emerging Problem
The Consumer Price Index (CPI) rose 3.2 percent during the first six months, due to recent food price hikes driven by the higher costs of grain, meat or poultry products and eggs.
The lower price level of last year is a major factor that made the growth rate of the grain price relatively high. Excluding food and energy items, the core price index rose only 0.9 percent between January and June. Despite the surging food prices, industrial producer prices remained basically stable, and general purchasing prices of raw materials, fuel, and power products dropped relatively.
Meanwhile, Li warned that, excess liquidity is prominent, and an overheated real estate market might trigger inflation.
Rapid but Stable Increase
Li noted that, first of all, over the past four years, China's macro control policies have shown their effects, in particular in infrastructure construction and improved basic industry. Second, the world economy developed better than expected at the beginning of the year. Third, China's general cut of export rebates and adjustments of the tariff level, in addition to frequently heightened benchmark interest rates and required reserve ratio, have all been factored into China's rapid but stable economic development in the first six months.