Fast growth and macro-control in 2006

In 2006, the first year of the 11th Five Year Plan, fast growth and macro-control have become the two key concepts in national economic development. In the first three quarters of this year, China has witnessed a growth rate of 10.7 percent.

China had a bumper harvest in summer and has improved efficiency in enterprises. This has led to a growth in financial revenue, stable prices and a steady increase in the incomes of both urban and rural residents. The slowdown of the real estate market has shown the effectiveness of macro-control policies. In the first three quarters of this year, real estate investment increased at a rate of 24.2 percent, 7.7 percentage points lower than in the same period of last year.

By the end of the third quarter, both currency supply and growth of loans had slowed. Some industries, including coal, copper smelting, aluminum and cement had made progress in restructuring and orientation. Some positive changes have also been seen in the real estate market. The housing supply structure has been readjusted and housing prices in some areas have been falling. Many provinces have put an emphasis on medium and lower price housing, medium and small-sized commercial housing and economical housing. The mix of exported products continues to be optimized.

In the first ten months of this year, China's high value-added machinery products have been exported for US$439.7 billion, a 29.7 percent increase, accounting for 56.4 percent of total exports. Export of crude oil has fallen 5.09 million tons, representing a 12.5 percent decrease, while export of refined oil has fallen to 9.99 million tons, 17.6 percent less than the same period last year.

However, many contradictions are still present in the economy this year. For example, RMB currency is still being over-issued which has led to an excess of currency in circulation. Investment continues to grow rapidly while international income and expenses are not balanced. In order to guarantee steady economic development, a series of macro control policies have been taken.

In the first half of this year, in order to contain the rapid growth of credit loans and investment in real estate, the central government controlled both land and credit approval. The National Development and Reform Commission (NDRC) and the Ministry of Land and Resources have issued "Suggestions for Strictly Controlling the Start of New Projects" and "Suggestions for Readjustment of Real Estate Prices".

The central bank increased the interest rate on loans, consolidating the supervision of co-financing and savings. In order to accelerate the restructuring, the State Council issued a notice on restructuring those industries which have an excessive production capacity, such as cement, aluminum, ferroalloy, coke and coal.

In order to encourage farmers to grow more grain, the Chinese government abolished the agricultural tax at the beginning of 2006. Tax on all special agricultural products except tobacco has been cancelled. Tax on animal husbandry products has been completely cancelled, too. In addition to subsidies for high-quality seeds and agricultural machinery, fertilizer, pesticide and oil have also been subsidized.

Although macro-control measures have been taken, the economic growth rate is still very high, especially in the second quarter of this year, when the growth rate reached 11.3 percent. In view of this, the central government has issued a series of policies on investment, credit loans, foreign exchange rate, land management, housing, energy saving and environment protection.

In August, five ministries, including the NDRC, the Ministry of Land and Resources and the State Environment Protection Administration, jointly issued suggestions to guide the work of clearing up newly started projects, total investment in which reaches 100 million yuan.

In September, the State Council issued a notice on strengthening land readjustment. The government has also issued a notice about illegal actions in land use, improving land management and law enforcement to successfully implement macro-control policies.

In order to optimize the export mix, five ministries have come up with a new tax return scheme for enterprises in order to reduce the export of resource-oriented products and encourage the export of high-tech products. In addition, new measures in real estate and the financial sectors have also been introduced.

Fast growth and macro-control have been the two main themes of national economic development in the first three quarters of this year. China has made a positive start to the 11th Five Year Plan period in 2006. However, one has to be aware of changes and new problems in the system and structure. Rapid investment growth may reoccur as the enthusiasm to launch into new projects remains. High energy consuming industries may continue to thrive and an imbalance between international income and expenses still exists. Farmers' income is still uncertain. There is still a long way to go before China's contradictions are smoothed out and steady and healthy development is maintained. It is important to continue with the macro-control policies while harnessing the enthusiasm of various groups around the country in order to maintain rapid and healthy development.

By People's Daily Online