Li Jiange，Lu Zhongyuan，Zhang Liqun，Li Jianwei & Han Jun

Since January 2007, investment has mounted up again at a slower pace，consumption has become increasingly brisk，and the domestic demand has speeded up at a higher level. In foreign trade, export has grown continuously and rapidly. Driven by the demand，economic growth has accelerated at a higher level，and commodity prices have increased to some extent. Besides, affected by the over-cash flow，stock market has heated up quickly and there have lurked some unstable and unsound factors. Some major potential has existed for the expansion of demand for domestic investment, consumption, housing market and stock market，forming a contradiction against the policy target of stabilizing economic growth and relieving pressure on resources and environment. To address these issues，a series of measures have been adopted to control the increase of investment and export, stabilize monetary and financial environment，as well as strengthen the construction and supervision of the stock market and relevant rules and regulations，which have achieved initial success. By sticking to the macro-control policies towards these areas，it is predicted that growth of demand will tend to be stable，acceleration of economic growth will be brought under control during the later half of the year and the stock market will develop on the right track.

I. With the Policy Effects Being Released，Economic Growth Will Tend to Be Stable at a Higher Level

It can be seen from within the year that what has been crucial to the level of economic growth is mainly the development speed related to investment, consumption and export. During the later half of the year，it is predicted that demand for investment, consumption and export will see an overall stability.

1. The present macro-control policy should be carried out in a persistent way，and there will be little possibility for investment rebound

Since January 2007，investment growth has shown an accelerating tendency. From January through February, fixed asset investment in cities and towns soared to 23.4%，year on year, and showed an increase of 27.1% year-on-year in May；many new projects were started in April and May. The present increase in investment growth, as we may think, assumes some recovery in nature. The main grounds include：first，growth of investment at the end of last year was on the low side. During the later half of last year，growth of investment dropped by a wide margin under the influence of a series of macro-control policies. Fixed asset investment in cities and towns was up by only 10.4% in the month of December. With a view to a steady and fast economic growth and the demand for various construction undertakings，investment growth should be mounted up in a proper way. Second，there has been little increase in present investment growth. During the first half of this year, fixed asset investment rose by 25.9% year on year，up 1.9 percentage points from the end of last year，but down by 3.9 percentage points as compared to the same period of last year. Between 2003~2006，fixed asset investment grew by 26% annually，and at present such a rate still remains in investment growth. Third，the newly started projects have witnessed recovery growth. The overall examination carried out in the later half of last year produced an obvious influence on the newly started projects. At the end of November，the planned total investment in new projects increased by only 3.7%, year on year. During April and May of 2007, the number of new projects was quite limited.

Future growth of investment mainly depends on the market change and the implementation of investment control policy. In view of the market，the number of industries with an overproduction capacity has expanded，the bottleneck restriction on basic industries has been notably relieved，and there have been no products showing an evident short supply. As a result，the market competition is fierce，the anticipated rate of returns from investment by real economies is not high，and the enterprises are cautious with investment. According to investigation by the National Statistical Bureau，the Purchase Management Index （PMI） reflecting the enterprise anticipation of the market is beginning to decline. It can be seen from investment control policy that such measures on the control of proper availability of land and credit and the improvement of market access system are taking shape gradually in recent years，which have achieved some effects. Despite the political factors, such as alternation of local governments and the forthcoming 17th National Congress of the Chinese Communist Party，the Central Government has always stressed that fixed asset investment should be brought under strict control from its overgrowth，a firm control should be kept on the proper availability of land and credit and the improvement of market access system，and strict measures should be taken against serious law-violating practices，which has thus helped to hold back the obvious investment rebound impelled by local governments.

2. The consumption growth is stable and will not cause enormous disturbance to the annual economic growth

Since the beginning of the year，consumption has remained brisk and its role as a major source to drive the economic growth has been gradually strengthened. As consumption demand depends on household income level, income expectancy and family budget，there will be no conspicuous ups and downs, and the economic growth in 2007 will not be disturbed drastically. What merits attention is that although consumption demand will not exert conspicuous influence on the economic growth within the year，upgrading of the consumption structure will play a decisive role in the medium and long-term economic growth. One of the important reasons for the insufficient domestic demand in China since 1998 was that upgrading of domestic consumption structure had not started；whereas from 2001 onwards the increasingly dynamic consumption demand is mainly attributed to the upgrading structure of consumption toward the improvement of living and traveling conditions.

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