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Aimed for better, faster economic growth: Coment (2) |
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17:29, July 24, 2007 |
Nevertheless, there was a still grave issue featured with "three excessivenesses" in the course of China''s economic development, namely, the excessive trade surplus, the excessively fast credit granting and the over-growth of investment. In fact, the issue relating to the "three excessivenesses" boiled down to the excessive fluidity surplus. So the entire Chinese economy is faced with a threat of the runaway inflation as the excessive fluidity surplus has given rise to pressures on the consumer price index (CPI) and other price norms.
In the first half of this year, the year-on-year consumer price grew by 3.2 percent (the year on year growth in June was 4.4 percent), 1.9 percentage points higher than that in the same period last year. To calculate in term of CPI statistics, however, after the imposition of the central bank''s interest rate raise and the withholding tax cut, the actual interest rate stands at -1.24 percent, and no new look has so far been effected with the negative interest rate.
An immense trade surplus has given expressions to the structural contradictions in China''s external trade. They are: a fairly high export volume versus a relatively low import volume, and the import of law materials at the exceeding hefty prices versus the export of products at much lower prices.
In the wake of a rapid rise in the prices of international law materials over recent years, most of the Chinese production enterprises, chiefly the labor-intensive ones, have to bear enormous burdens with their products cost and have to cope with a series of tough problems evoked from a supernormal trade surplus, a huge foreign exchange reserve, the high cost rise for enterprises and pressures from inflation.
Consumption, investment and import/export represent a troika to pull China''s national economic development. China resort to on investment in production of consumer goods to push ahead the growth of its economy in the 80s of the last century and relied on input in investment products to spur the growth of the country''s economy in the 1990s and, since the turn of the new century and particularly with its accession to the World Trade Organization (WTO) at the end of 2001, the import/export and investment have been turned into one of the troika to truly spur the growth of Chinese economy.
Nevertheless, in view of China''s experience of nearly three decades in the reform and opening to the outside world, the consumption has never been one of the main motive forces for the country''s national economic development.
Hence, it is far from being adequate to hinges on the economic set-up itself or the monetary policy alone to resolve the in-depth structural contradictions. So the government should guarantee that the market mechanism allocate resources more efficiently and effectively. In so doing, can both a temporary solution and a root cure be sought for the "better and faster growth" of Chinese economy.
By People''s Daily Online and its author is Hu Yuyue, director of the Securities & Futures Institute affiliated to the elite Beijing Industry and Commerce University.
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