Those who tend to pause and think will always have a nose for news, as is the case with China's recent 2007 Central Economic Work Conference. There, perceptive readers made a 'new discovery' and drew a timely conclusion: 'two preventions'--- prevent economic growth evolving from overheating, and prevent the price hike from shifting to evident inflation. Next, they asked me to elaborate on this notion. As a correspondent reporting on the economy for years, I had to stop and think before voicing my thoughts.
As far as I can see, the 'two preventions' set forth by the central government at the conference have come at a good time and show great foresight.
Three 'over' s in current economic work make it necessary to prevent economic growth from overheating.
First, oversized assets investment motivates an overheating economy.
In the first three quarters of the year, assets investment increased by 25.7%; and although there was a 0.2% drop compared with the first half of the year, the size of investments snowballed. In the meantime, the investment structure is far from rational. Specifically speaking, total assets investment in the first half of the year amounted to 4.2 trillion yuan RMB, growing by 29.8%; and increased by 4.4% in growth rate compared with the same period last year. As for industrial structures, some newly-initiated projects cannot conform to state policies; and the product mix tends to be the same.
Secondly, overgrowth in credit investment poses a new problem for price control.
According to financial operations data from September (released this October), by the end of September, the money supply – in both a narrow and broad sense – had risen by 22.07% and 18.45% respectively. The balance in RMB loans came to 25.90 trillion yuan RMB, jumping by 17.13%; and the newly-emerging RMB loans in September totaled 283.5 billion yuan, 63.5 billion yuan more than the same period last year. There was a dramatic breakthrough in preliminary credit expectations for 2007: the broad-sense money supply is set to grow by approximately 16%.
Additionally, the overflow in favorable balance of trade and the constant foreign currency surplus has enhanced market expectations for RMB revaluation.
Gross foreign trade import and export values have climbed up to 1.8 billion US dollars in the past ten months. Export values totaled 986 billion US dollars, increasing by 26.5%; and import values reached 773 billion US dollars, up 19.8%. The trade surplus, influenced by rapid import growth for the last ten months, has finished at 212 billion US dollars – increasing 59% compared with the same period last year. In October alone, the trade surplus had already reached 27 billion US dollars – 13.5% up against last October – chalking up a new record in history.
Under the combined influence of the macro and micro economy, the effects of the three 'over' s on economic operation loom large. Accordingly, the country's consumer price index has been on the increase since July; and rocketed to a high, unheard of in recent years, in August and October: 6.5%. Thus was born another 'prevention' at the economic work conference: prevent the price hike from shifting to evident inflation.
It is clear that China's economy has set out for another booming year, as long as it stays on the right track and avoids the harmful effects that accompany achievement. Like a giant vessel at sea, China's economy is braving winds and waves to stay on the crest of a wave, and make rapid headway.
By People's Daily Online
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