Analysis: how China maintains robust, soaring economy ( 2003-07-07 11:01) (Xinhua)
The outbreak of severe acute respiratory syndrome (SARS) has not altered the
robust nature of China's soaring economy.
It is thanks to the government's effective anti-SARS measures, the
accelerating expansion of the Chinese economy, the upgrading demand of
consumption and the continuous influx of foreign capital that China was capable
of withstanding the SARS impact and maintaining rapid economic growth, said Fan
Jianping, an economic forecaster with the State Information Center (SIC).
The World Bank estimated that China's economic growth dropped sharply from
9.9 percent in the first quarter to 6.5 to 7 percent in the second due to SARS,
and the SIC calculated a higher loss from SARS than from the Asian financial
crisis in 1997.
However, international economic organizations insist that China 's gross
domestic product will attain an eight percent growth rate in 2003.
A CASS (Chinese Academy of Social Sciences) report said SARS is an external
impact rather than an economic crisis, so its influence on the economy is
limited, temporary and relatively easily dispelled.
International financial organizations, including Morgan Stanley, successively
raised their predictions on China's economic growth after the Chinese government
checked the epidemic within three months and took measures to minimize its
effect, and as people have quickly regained confidence in the economy.
Deepak Bhattasali, lead economist with the World Bank Office in Beijing, said
China's economy is in the rising phase of its economic cycle, which helped it to
bear the external impact.
Echoing this point, the Development Research Center of the State Council
declared that China's economy entered a new round of expansion in 2003 after a
seven-year slowdown, thanks to the government's stimulating policies of raising
fiscal expenditure and money supply in the past five years.
The power of the policies came into full play in the first half of 2003, said
the research center, noting that enterprises eager to invest and prepare for a
fresh expansion by renewing equipment and technology on a large scale and rising
demand for housing and cars triggered a rapidly-growing demand for steel, energy
and building materials, which in turn led to short-supply of electricity and
rising prices for raw materials.
Ultimately, China shook off its persistent deflation trend after five years'
striving, according to the research center.
Mutilnationals continue to invest in China despite SARS, and foreign
investment in China increased by nearly 50 percent in the January-May period
from a year earlier. Exports also avoided excessive losses from SARS, because
half of China's export products came processing trade, which is mainly for
multinationals.
Economists also realized that SARS did bring problems to China' s economy.
CASS economist Wang Tongsan warned of the severity of SARS-caused unemployment.
He said SARS hurt the service sector, China's major job provider, most
seriously, which might influence the employment situation, residents' income and
the fiscal deficit.
The important thing now is to prevent large economic fluctuations and try to
extend the expansion period, so as to form a favorable cycle of increasing job
opportunities, residents' income, consumption and investment, suggested Fan with
SIC.
The Chinese economy has endured various challenges in recent years and showed
ever-increasing stability. Its performance during the Asian financial crisis,
the Sept. 11 terrorists attack in the United States and the Iraq war impressed
the world deeply.
The Chinese government learnt how to deal with crisis from its SARS
experience. It further stressed the coordination of fiscal policy, monetary
policy and exchange rate policy, and adjusted the structure of fiscal
expenditure while maintaining proper expenditure scale, said Bhattasali.
He predicted that China's economy will begin to rise in the third quarter
although the SARS impact will linger for some time.
