By Li Hong, People's Daily Online
The quarterly economic numbers released by the government's National Bureau of Statistics are encouraging. Although the gross domestic product or GDP growth of 6.1 percent is lowest in as long as a decade, it is rather shiny if it is compared with other countries, or read in comparison with the corresponding months last year, when China's economy was running by double-digits.
Chinese Premier Wen Jiabao told a State Council meeting last week that the conditions of the world's 3rd largest economy was better than expected, and he attributed it to the government's timely stimulus measures. He was right. The huge US$586 billion fiscal stimulus plan, worked out by the cabinet in November, a sum unprecedented in China's history, has borne with tangible results.
The economy is definitely recovering, and right now it is taking on renewed impetus, building up on the surging confidence of Chinese consumers and corporate investors and private businessmen. Fixed assets investment that skyrocketed by more than 33 per cent for the first three months will lead to increasing output later this year, which will create lots of jobs for the needy.
If we use another economic measurement, the annualized rate of growth from one quarter to the next, the economy may have made marked gains during the first quarter in 2009. Qu Hongbin, an economist at HSBC, calculated that, using that measure, China's economy had grown at 6.2 percent in the first quarter, compared with just 2.5 percent in the fourth quarter last year, when the economy was hit hardest by the global financial crisis. This comparison speaks a ton.
And, deflationary pressure is dampened, thanks to the government's approaches to inspire domestic consumption in dire times. Tax deductions and breaks are given to urban property and vehicle buyers, subsides are issued to suburban and rural farmers who snap up electric appliances including televisions, fridges, washing machines, computers and other items. Retail sales for the quarter jumped by 14.9 percent, a remarkable growth considering the traditional Chinese-held value of "saving (money) for kids, saving for the unknown future".
The huge bank credit issued by China's commercial banks, in company of the US$586 billion stimulus plan, has significantly improved finance liquidity in China, which helps combat deflation too. The consumer price index, a major gauge of deflation/inflation, slowed its decline in March to minus 1.2 percent, from more than 2 percent in February. A slowing price descent will also enable the country's central bank to maintain its interest rate policy. That could also explain why many stock investors' expectation that the central bank reduces the rate further during the weekend, did not materialize.
Although exports remain sluggish in the first quarter, because of continuous weak demand from China's major trading partners, the March number, declining 16.8 percent, is better than the figures for January and February, when export shipments tumbled by more than 25 percent. Analysts explained that the majority of overseas importers' warehouses are now depleted, and are beginning to shop for inexpensive Chinese goods.
The numbers look somewhat rosy or heartening, they are attained not easily. Beijing has acted with dedication and acumen in the first place. Amid worries that the economy could be walloped by the global crisis, the leadership acted aggressively. As early as the financial hurricane cascaded and churned offshore in September and October, the government was trying to mitigate its impending impact on domestic economy by meting out a massive fiscal spending program.
The US$586 billion stimulus, revealed in mid November, represented a fresh commitment by Beijing to keep from adding to the economic woes of the United States, Japan and Europe. It's also aimed to cheer investors in China's economy by ensuring that the country will remain a source of strong growth during difficult times.
Now the economy has gained momentum and is moving onto a relatively fast lane.
After the country's banks have lent out 4.58 trillion yuan of loans during the first three months, the equities market has staged a strong comeback. With new railways and express roads rapidly paved, bridges erected, tunnels extended, and airports expanded nationwide, business from car dealership, real estate developers, urban and rural retail markets running brisk, and restaurants returning to full capacity catering, the steering of the economic policies calls for caution.
Obviously, nobody wants a new bubble to arise from the horizon.
The article represents the author's view only. It does not represent opinions of People's Daily or People's Daily Online.
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