Officials from China's National Bureau of Statistics said on June 23 that following the implementation of policies by the central government to boost domestic demand, insufficient demand has been eased to some extent. However, production capacity utilization ratios in many industries remain low and insufficient demand is still the key challenge facing China's economy.

Although the growth in domestic demand has continued to accelerate, it is still unable to completely offset the shrinkage in foreign demand.

In the first five months, China's rural and urban fixed asset investment rose 32.9 percent. The planned investment in rural and urban newly-commenced projects, which indicates the future trend for investment, increased 95.9 percent year-on-year, representing a continuously accelerating trend. In the same period last year, there was a decline of 2.5 percent.

The gross retail sales of consumer goods rose 15 percent in the first five months or 16.4 percent taking price adjustment into account, an increase of 3.7 percentage points year-on-year.

However, despite accelerated growth in domestic demand, the increase in industrial output remains at a relatively low level. The key is the heavily contracted foreign demand.

Export growth tumbled to 4.3 percent in the fourth quarter of 2008 from 22.9 percent in the third quarter. Export dropped 19.7 percent year-on-year in the first quarter of 2009, and down 24.6 percent in the period between April and May.

In respect of the relation between export delivery value and industrial output, export delivery value contributed to a 0.9 percentage point increase in industrial output in March 2008. Since November, export delivery value has had a negative effect on industrial output, dragging down the industrial output growth rate by 2.2 percentage points in the period between January and February, and 1.5 percentage points in the period between April and May.

Current lower-than-normal economic growth and low production capacity utilization ratios reveal not only the surplus of production capacity in many industries, but also an insufficient demand.

In terms of price changes, both CPI and PPI are continuing to drop year-on-year, indicating that demand has remained insufficient in relation to supply.

By People's Daily Online

http://paper.people.com.cn/rmrb/html/2009-06/24/content_281250.htm