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China tries to revive economy despite daunting challenges

(Xinhua)
Updated: 2008-11-09 15:43

Despite all the difficulties and uncertainties, Chinese officials largely believe the country's economy remains in good shape and will maintain stable and relatively fast growth. National Bureau of Statistics (NBS) chief Ma Jiantang ascribed sound economic fundamentals to four factors.

Migrant workers who quit their jobs in Guangdong province arrive in Zhengzhou, Henan province, November 3, 2008. Thousands of migrant workers in the Pearl River Delta are packing up and heading home, as jobs and decent wages in the region become increasingly hard to find.[Ma Jian]

First, China maintained the world's fastest economic growth rate. Although it fell by 2.3 percentage points year on year, the 9.9 percent GDP growth in the first three quarters remained much higher than those of Western countries and was still at the average of the past 30 years of the country's reform and opening up.

Second, China had succeeded with commodity price controls. The CPI eased to 4.6 percent in September from the same period last year. It hit a 12-year high of 8.7 percent in February.

At the end of the month, the broad money supply (corporate and individual deposits plus cash in circulation) increased 15.29 percent from the same period of last year. The rate was the lowest in three years. The growth in narrow money (current deposits plus cash in circulation) supply slowed to 9.43 percent.

Lu Zhengwei, chief economist with the Industrial Bank, predicted a CPI rise of 4.2 to 4.4 percent in October, based on weak market demand and a decrease in money supply.

Third, China had increasing foreign exchange reserves. China's current account surplus rose by 18 percent to $191.7 billion  in the first half, according to the State Administration of Foreign Exchange (SAFE), the foreign exchange regulator. The balance sheet revealed foreign exchange reserves of almost $1.81 trillion at the end of June.

Fourth, China had good employment rates. Ministry of Human Resources and Social Security (MOHRSS) spokesman Yin Chengji said the country created 9.36 million jobs in the first three quarters, and helped another 4.09 million laid-off workers find new jobs.

By the end of September, China's registered unemployment rate was unchanged from the end of last year at 4 percent, with about 8.3 million unemployed.

"We should be confident in the country's economic outlook," said Ma Jiantang. "The country has rich resource reserves, great market potential, vigorous enterprises and the government has strong macro-control abilities."

Policy Adjustment

To minimize the negative economic impacts and maintain stable, relatively fast growth, the government made a new policy shift in the current round of macro controls that was initiated despite the high risk of economic overheating.

Challenged by coincidence of increasing uncertainties abroad and problems and contradictions at home, the economy slowed along with the economic downturn worldwide. GDP growth ebbed to 10.1 percent in the second quarter from the first quarter's 10.6 percent level, and dropped further to 9 percent in the third quarter.

The government changed the macro-control policy of preventing overheating and curbing inflation, which was adopted at the end of last year, to a principle of maintaining growth and taming inflation.

"China has to upgrade its economic growth structure. Exports cannot grow fast in the near future -- it is the right time for the government to boost domestic demand and stimulate consumption," said Zuo Xiaolei, China Galaxy Securities chief economist.

Worrying about a cooling economy and other domestic problems amid a deepening world credit crisis, the People's Bank of China, the central bank, cut the RMB benchmark deposit and loan interest rates of financial institutions, both by 0.27 percentage points, from October 30. The one-year benchmark deposit rate was lowered from 3.87 percent to 3.6 percent and the loan rate from 6.93 percent to 6.66 percent.

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