Economic operation steady, investment perspective bright

At a recent press conference of the State Council, Zheng Jingping, spokesman of the National Statistics Bureau, responded on hot economic issues, such as macro-control policy, slowed growth of fixed assets investment and rising consumer price index (CPI).

Slowed investment growth not to affect economic operation

As to whether the obvious slowdown of fixed assets investment in the first half-year will affect the overall economy, Zheng held that it is a common practice in many countries to moderately control the swelled investment and launch macro-controls over problems popping up. The central government tightened macro-control against the over-heated growth, swelled fixed assets investment, and inferior overlapping constructions in some industries. The macro-controls may take effect at the cost of some immediate benefit of some people and enterprises, which are necessary sacrifice for long-lasting and steady development. Or otherwise, should there be no control, it might, to some extent and at some time, have a crack in the self-isolating cycle of the fixed assets investment and heavy industry. Then passive controls and tightening measures will lead to turmoil costing more.

The macro-controls this time will not change the general policy-reform and opening-up-set at the Sixteenth National Congress of the Communist Party of China (CPC) and the third plenary session. All the measures: striving to develop and actively guiding non-public economy, continually encouraging foreign investment, improving investment environment, opening-up system, giving a better play to the foreign investment, will not change. The investment perspective remains bright to private enterprises, foreign enterprises and state-owned ones.

General stability with no tumult

Some people consider China's economy as overheated just because that the growth rates of Gross Domestic Product (GDP) was at 9.8 percent and 9.6 percent respectively in the first and second quarter. It is incorrect, Zheng said. China's economy is generally running well: a fast growth but no drastic rises and falls. In terms of the economic growth rate, the second season was 0.2 percentage point lower than the previous one. Taking the SARS (Severe Acute Respiratory Syndrome) outbreak in 2003 and a lower rate in the second quarter, it is clearer that the growth in this period did not exceed the potential capacity. From the four major indexes for measuring economic development: CPI, employment, utility of foreign investment and foreign trade, it is groundless to say China's economy has problems.

From another perspective, the industries expected to become brisk through macro-control are boosted and those expected to be curbed restrained. For example, agriculture, especially, grain output and farmers' income are strengthened, while the accelerated fixed assets investment, issue of credit are necessarily controlled. That means macro-control is timely, moderate, beneficial and effective, and absolutely correct.

No big changes to be seen in CPI

The CPI in the first half-year saw a year-on-year rise from 2003 and especially that in last June rose by five percent. To this, Zheng said, the rise is mainly the result of comparison with the base period and meanwhile, in the price rise, carryover effect accounts for 3.9 percentage points, while the new price hike only 1.1 percentage points. In the five percent, food price rose 14 percent, affecting 4.4 percentage points, while non-food price 0.6 percentage points. In many matured market economies, it often needs a core price index, a figure excluding the prices of food and crude oil, which are not much affected by currency. The price of food is mainly determined by weather and harvest while that of the crude oil is more dependent on international market.

The five-percent rise of CPI in June does not indicate a continuous situation in the several months to come. The output of summer grains has increased by 4.8 percent, early rice and autumn grains have been enlarged in area, which laid a foundation for the increase of output in the whole year. Meanwhile, under the macro-controls, currency, credit supply has slowed down from the first quarter, so has the fixed assets investment and the pressure on prices, especially that on the upper-reach products, will also be eased. Plus the weakening carryover effect in CPI growth, it is expected that the CPI in the whole year is not likely to change by a big margin. Although five percent is a sensitive figure, facts above indicate that it's not necessary to exaggerate its impact.

By People's Daily Online