China retained an average GDP growth rate of more than 9 percent in the past three decades or so. Its economy had a double-digit growth for five straight years beginning 2003 before sliding in 2008. This drastic economic downturn is ascribed to two main factors. One comes from an influence from the economic cycle of boom and decline, and the other is attributed to the impact of global financial crisis on Chinese economy.
Precisely for this reason, China's central government launched in November last year a four-trillion-yuan (about 586 billion US dollars) stimulus package to boost domestic demand. According to estimation, this stimulus plan will drive the country's economic growth up by one percent each year.
Judging by breakdowns available in the first quarter of 2009, China's GDP growth dropped 0.7 percent from 6.8 percent in the fourth quarter of 2008. With the deceleration of its growth rate, Chinese economy showed signs of encouraging, positive changes. As a prudent optimist, I personally cannot be over-optimistic nevertheless, as the country's first quarter GDP growth rate came in mainly as a result of increased consumption demand. Then there is corporates' owned retained profits -- which are a major source of investment spending.
China's first quarter GDP growth in 2009 was achieved chiefly from a stronger domestic consumption demand. Within this GDP growth figure for the first quarter of the year, domestic consumption contributed to 4.3 percent and investment to 2 percent, with net exports contracting 0.2 percent year-on-year.
Then, how could (domestic) consumption draw up economic growth in the first three months of the year? There are two causes, I suppose. First of all, during the New Year's Day and the Chinese Lunar Spring Festival, especially in the duration prior to the traditional festival, it was the peak consumption time for people in China. Besides, the central government set forth a 15-billion-yuan (2.19 billion dollars) subsidy plan on home appliances purchase for rural areas.
In addition, local or regional governments were also asked to provide varied, appropriate auxiliary aid to stimulate consumption, including the issue of consumption coupons or certificates. In fact, government subsidies could only help cushion the likely downslide deceleration in economy, but unlikely solve problems once and for all.
Economic growth in this year's first quarter is also indebted to a loose monetary policy. Chinese banks extended a stunning 4.58 trillion Yuan (about 670 billion dollars) of new loans in the first three months of the year, or more than 90 percent of a government target of 5 trillion yuan for the entire year, recent data showed.
However, the investment only grew 2.8 trillion Yuan (411 billion US dollars) in its wake, and a lot of money was poured or diverted into stock markets and real estate markets. Such a loose monetary policy, nevertheless, was hard to sustain. In April, the total sum of loans was down about 60 percent than in the first three months of the year.
Hence, the viable, efficient investment is the only fundamental way out. Investment would help create more jobs, improve people's livelihood and bolster the demands for production materials. Some investment can be translated into the money for consumption through wages or salaries in a bid to help prevent deflation and curb excessive production capacity and overstock.
In view of China's economic situation in April as a whole, retail sale growth in the country was equal to that of the 2009 first quarter. So, China should continue spurring consumption so as to prop up economy and particularly to raise the purchase power of its people and relieve them of their worries behind by means of setting up a perfect social security network.
Secondly, efforts should be beefed up to raise efficacy or efficiency and, thirdly, even greater efforts should be taken to do a good job with the country's foreign trade and strive to export more overseas.
Sooner or later, the global financial crisis will end. In term of economic growth, I am now looking forward to a better economic growth in the later half of 2009 than in the first half year, and China will certainly be even better next year. By 2011, the country will be expected to score an annual growth rate of over 9 percent, which can also be a high-quality, sustainable growth rate.
In the dead of winter, people usually expect the arrival of spring. Just like prestigious British poet Percy Bushel Shelly (1792-1822) once wrote in his poem: "If winters come, can spring be far behind?" People in China are currently working courageously and assiduously with such a conviction to greet the arrival of "another spring" for Chinese economy.
By Cheng Siwei, a People's Daily specially-invited guest commentator, a pre-eminent Chinese economist as well as former chairman of the Standing Committee of the National People's Congress, and translated by PD Online
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