When people across China and elsewhere in the world are waiting eagerly but joyously in the sweltering heat of this mid-summer for the incoming 2008 Beijing Olympic Games, a "mid-year-test" report card of Chinese economy is presented to us: China's GDP is up 10.4 percent in the first half of 2008, ranking the first among all the nations worldwide; the country's CPI rises by 7.9 percent in the first half year, and its GDP overtakes CPI. And what merits special attention is that the GDP growth rate is 1.8 percentage points lower year-on-year.
Moreover, the export growth rate, one component part of the "troika" (herely vividly refers GDP, CPI and export growth), drops 5.7 percent in the first six months of 2008, the first time ever since China's entry into the World Trade Organization (WTO) in December 2001. This seems to be somewhat grief amid our joy or good fortune.
If this "test report card" is read or deliberated very carefully, we cannot but remind ourselves of an early prediction appeared at the start of the year, that is, "China's economic situation for 2008 allows no optimism." To this prediction, some people once kept disagreement to themselves. When an "inventory" of economical achievements was made in the mid year, more uncertainties and unstable factors for this year's economic growth with a greater negative impact are ascertained than formerly estimated.
In this eventful year with so many changes and frequent natural adversities, China's economy has stood tests from both at home and abroad. The nation was struck by a deadly blizzard disaster in southern China at the beginning of the year and the tragic, devastating Wenchuan earthquake, measured at 8.0 on Richter scale, in Sichuan and other adjacent western provinces in early May.
Overseas, the U.S. sub-prime mortgage crisis has hit consumer spending and spread worldwide, and the global financial market is in a perilous situation. With surging oil and food prices, a global economic slowdown is likely to occur amid great risks… "Braving these risks buffeted by wind and rain", China's economy however has retained a good basic shape with a smooth and relatively faster pace, and goes on advancing toward the anticipated direction of macroeconomic control. This is by no means easy!
Beyond these statistical figures, however, a predicament in reality is truly outstanding: Overall commodities prices keep rising, inflation pressures continue to increase, coal, electric power, and crude oil are somewhat in short supplies, and the task for energy saving and pollution emission reduction remains arduous; exchange reserves are in somewhat too rapid rise, and there are fairly great fluctuations on the capital market; the efforts for greater farm yields and farmers' income raise are under restriction from numerous factors; exports slide down gradually, quite a few manufacturing industries in eastern China come into a dilemma, and particularly some small and medium-size enterprises haved halted production and even shot down, with a negative impact on the job market.
Since early this year, the Chinese government has made the control of inflation the priority in its work and taken a range of macroeconomic control policies, so that some positive changes have occurred in the counry's economic performance: The role of consumption in "pushing up" economy has been reinforced, and new paces quickened in epitomizing economic structure, in the transfer of industrial mix and technological innovations, and in improving the quality of growth constantly; and the growth range of CPI has dropped for two months in a row. And it should be acknowledged that the current price rise reflects in a concentrated way contradictions China has encountered during its current stage of development, in the shift of its economic setup and in the process of its participation in the process of economic globalization.
Inflation control, nevertheless, is not meant to be brought about at the cost of economic development, and varied economic signals surfaced so far indicated an alert. That is, it is essential to guard against deflation and avoid a "hard landing" at the time when efforts are being taken to battle against inflation.
"Intensified inflation control" is aimed at "promoting the transfer of economic setup". An economic entity is sure to make some adjustments and to "seek both a temporary solution and a permanent cure" with due consideration to give both the long-term and short-term interests. If some progress has been scored in China's macro-control endeavor to prevent overheating of the economy in the first half year, its emphasis in the latter half year is to handle well the relationship between inflation control and (economic) growth promotion, so as not to be bogged down a "mire" of an apparent drop in growth rate and still fairly high prices.
Owing to an intricacy of unfavorable factors from at home and overseas, localities and enterprises alone cannot cope with many difficulties and problems even though China's macro-economy has been "better than expected." At the time of promoting the transfer of economic setup and ensuring the smooth continuity of policies, it is imperative to have a clear aim with an increased foresight and flexibility. For example, should the policies concerning (foreign) exchange maintain basically stable, should the monetary policy combine "toughness and gentleness"; and should the taxation policy play an even bigger role? With regard to these questions, the rhythm, intensity and trends of macroeconomic control have to be mulled over, in an endeavor to assess the situation correctly in the course of beefing up and further improving the macro-economic control and weight the odds carefully before making the final decision at an opportune time.
The year of 2008 is a very special year with stern challenges. To bring about the "better and faster economic growth" in China, the word "better"now comes first whereas the word "faster" is not to be neglected. Only in so doing, it is possible to respond to and dissolve all domestic and external pressures, and make the "live tree" of Chinese economy burgeoning and evergreen year after year.
By People Daily Online and its author is senior PD editor Wen Zi
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