China's economy enters key period of soft landing
(Xinhua)
Updated: 2005-10-09 08:38

China's economy is now at a key period for soft landing in light of growing investment, the driving force of its fast economic expansion, according to a report by a task force for the State Development and Reform Commission.

China's growth of investment has been moving in the direction of coordinated and stable development during the first eight months of this year. "The whole macro-economy and investment has entered a key period of soft landing," according to a report published by a recent edition of the China Securities Journal.

Urban investment during the eight months totaled 4.115 trillion yuan (508 billion US dollars), up 27.4 percent year-on-year, or 2.9 percentage points lower than those for the past two years , the report says.

The growth rate of investment has now been on a gradually stable and rational track, according to the report.

China began to curb investment in overheating sectors such as cement, aluminium, steel and real estate early last year through tightened money and land supply.

Meanwhile, China encouraged investment in agriculture, energy, education and transportation for coordinated economic and social development.

China faces a critical shortage of energy due to increasing demand arising from fast economic development since 1978.

The economy has been growing at an annual average of 9.4 percent.

The report says the trend for China's investment and financing is stable decline as a result of two-year macroeconomic regulation.

The output and performance of downstream sectors, as indicated by the country's processing sector, the engine of the country's economy, is now contracting, the report says.

That will relatively reduce demand for raw material and other middle stream products, and for energy and other upstream products, it says.

Contracting demand from the perspective of external and domestic trade indicate the expansion of investment and financing will be restrained.

The year-on-year growth of China's sales revenues of manufactured goods for the eight months stood at 27.6 percent, down by 5 percentage points, although overall revenues of retail trade and housing were still growing.

China's foreign trade grew by 23.5 percent during the eight months, down by 14.7 percentage points.

The report said China should be prudent in regulating the scale of investment and financing to maintain stable investment growth, and continue its prudent fiscal and monetary policies for a new cycle of economic growth.

The task force also urged the Chinese Government to open up its capital market for private business to ease the difficulty in financing as experienced by the country's medium- and small firms.

It also called on the government to increase money and land supply to what are called three economic growth belts -- the Yangtze River Delta, Pearl River Delta and Bohai Economic Belt.

The Yangtze River Delta includes Shanghai, the country's biggest city and an emerging international financial, business and shipping center. The Pearl River delta, which borders Hong Kong, is known as the country's major foreign trade player.

The Bohai Economic Belt contains Beijing and the port city of Tianjin, two of the country's four municipalities under the direct jurisdiction of the Chinese Government.

The taskforce said China should continue its efforts to encourage investment in the agriculture, transportation and education sectors while boosting domestic demand through increasing products and services affordable to middle and low income groups.