China’s economy facing rare opportunities for development - analysis
China has been maintaining a good momentum for its stable but fast economic growth, or the GDP rose 11.5% in the H1 of 2007 after it grew 10% annually in the past four years. So it is foreseeable that the growth rate of its economy will retain at a relatively high rate for the entire period of the 11th ‘five-year’ program (2006-2010). This situation is ascribed mainly to a rare opportunity for the growth of Chinese economy.
There is relatively ample capital for development
China, a nation used to be short of funds, has greatly increased its capability of raising and amassing capital through financing, and its government departments, social institutions and individual residents now all have more capital to go around. Outstanding deposits of all financial institutions in the country have reached 36.9368 trillion RMB yuan (about $4.9 trillion), and so the supply of funds for its enterprise is rather ample. Trading is active on capital markets, and stock exchanges in Shanghai and Shenzhen have raised their fund-raising capabilities. Capital inflows in the form of foreign direct investment (FDI) have been about $60 billion a year. Many transnational firms confide in China’s investment environment and market potential. Hence, adequate capital is a vital, important factor to fuel China’s fast economic growth. Some bottlenecks for containing economic growth ease with a rise in the capability of making investment products
China, with a mammoth scale its fix-assets investment scale, has built and put into operation a large number of construction items and greatly raised its production capacity over the past few years. It turned out more than 400 million tons of steel, ranking the first in term of output; it apparently produced more coal, generated more electric power and increased its transport and communication capacity. From the angle of production, some departments and the supply and demand of their products have kept changing in a given period. Some over-produced goods and short-supply products are in a relative, dynamic and changeable state, and the short-supply and insufficient demands, too, are relative. So the drafting of economic plans or regulation of economy should proceed from the angle of development instead of approaching problems with static shortsightedness.
Rise of new consumption points propels economic growth
Since China’s reform and opening to the outside world was launched in the late 1970s, great changes have occurred in the people’s consumption level and consumption structure. The popular old-three-piece suite of “a wrist watch, a sewing machine and a bicycle” (or sometimes a radio set was added), subsequently gave way to a new three-piece suite that comprised a TV set, a refrigerator and a Hi-Fi stereo component system, and “these luxury articles” then were again replaced afterwards by high-grade, high-value commodities and new value-added services.
The Engel’s coefficient, a main indicator for standard of living, has dropped year by year to about 35% among Chinese urban residents, and areas of hot growth for new items of consumption include housing, cars, telecommunications (cellphone or mobile phones), education, medium service, tourism, recreations, medical service, insurance and health care.
To date, inbound and outbound tourism has represented a new consumption “hot spot”, and there have been more than 30 million outbound Chinese tourist trips each of the recent years, and the purchase of apartments and cars has become hobbies for people of social strata at or above a medium income level in the country. Rise of city groups becomes vital poles for economic growth
City groups in the Yangtze River delta in east China with Shanghai metropolis as its center and in Pearl River delta in the south with Guangzhou as the center have recorded an economic growth rate of over 10%. In recent years, a Bohai Bay-rim city group in north China that centers on Beijing and Tianjin, the city group in the old, rusty northeastern industrial base and a Central-China town group, now underway, all have their advantages and have turned increasingly booming. These city groups have given scope to a role of amassing, radiation and demonstration for their adjacent, surrounding areas.
A favorable environment to tap global markets and resources environment amid stable world economic situation Economic development in various countries worldwide was relatively good in 2006, and the increase rate of world economic growth reached 5.1% in the year, according to the IMF, and its forecast of global economic growth in 2007 was 4.9%.
There will also a rise in world trade accordingly, which is expected to be up to 7.5% this year. There are, of course, some differences or disparities between the forecasts and actual circumstances nevertheless but, generally speaking, the economic growth of leading economic powers has been fairly stable, and global economic technological exchange will expand. Recently, the US’ sub-prime loan crisis provoked fluctuations in the American financial and stock markets but it, however, would not trigger a slowdown in the US economy.
In view of its present economic situation, China has acquainted itself with global trade rules since it accessed to the WTO over five years ago; it now has a relatively ample foreign currency reserve with sound international payments; its enterprises have been turned more competitive than ever with their improved quality and some of its big firms have "gone overseas" to develop resources jointly with their overseas partners and open markets. Such circumstances are good and favorable for the country to go on tapping global markets and resources in a bid to accelerate its own economic development.
The existence of all these benign conditions offer a rare, exceptional opportunity for Chinese economy, and so China should be good at seizing and utilizing them and upgrade a new height for its economic growth. If China is able to retain a growth rate of 9% to 10% during the 11th five-year program (2006-2010) period, then its per-capita GDP is likely to reach more than 3,000 dollars by the year 2010, and its comprehensive national strength is bound to increase further still, so that a solid base will be laid for the grand goal of realizing an all-round, relatively affluent society in the country. (peopledaily.com.cn)
By Professor Xiao Zhuoji, an ace Chinese economist from elite Beijing University,
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