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China's Economy Maintains Sound Growth in the First Six Months

China's gross domestic product (GDP) rose 11.5 per­cent in the first half of 2007, according to Li Xiaochao, spokesman of the National Bureau of Statistics of China, explaining China's blistering economic performance over the past six months.

The country's GDP reached 10.68 trillion yuan ($1.39 trillion) in the first half, a growth of 11.5 percent, or 0.5 percentage points higher than that in the same period of 2006. Of the figure, the growth saw 11.1 percent in the first quarter and 11.9 percent in the second quarter. Foreign trade was boosted with a steady increase in the use of for­eign capital. In the first six months, foreign trade totaled $980.9 billion, up 23.3 percent year on year. China's na­tional economy, as Li said, continued to maintain a rapid growth, improved efficiency, harmonized structure and more substantial benefits for the masses of people.

Consumption: A Bigger Driving Force

China's economic boom was heavily reliant on invest­ment in the past, said Li. Since 2007, however, some new changes have taken place when investment declined and consumption rose, indicating that consumption has con­tributed more to the country's economic growth. Li attrib­uted this to the rapid increase of residents' income, which stimulated the fast growth of consumption demand. Gov­ernments at all levels have enhanced their investments in social securities, striving to solve problems concerning people's livelihood, such as education, medical care and housing. Residents are full of confidence in the country's future economic development and their consumption de­mands have been increasingly growing, propelling them to a new high.

Since China adjusted its foreign trade policy to in­crease export tariffs and cut refunds, a certain number of export companies endeavored to apply to customs before the July 1 deadline, resulting in a sharp increase of exports in June. It is expected to be restored to a normal level after the implementation of policies attempting to offset the trade surplus.

Investment: Rebound Pressure

When talking about the pressure caused by overheat­ing investment, Li Xiaochao said that in the first half of this year, the investment in fixed assets witnessed a drop of 3.9 percentage points as compared with the growth in the same period last year, or 2.2 percentage points higher than that in the first quarter of 2007. Reasons are as follows:

First, the number of new projects declined. Under the macro policy control of new projects, the total planned in vestment in new projects has shown slow growth since 2006. In the first half of this year, the total investment involved in new projects grew by 6.4 percent. This is the second time that the investment has grown positively since May.

Second, excess liquidity has provided sufficient social funds for investment.

Third, increasing profits and promising profit pros­pects of some enterprises and industries have stimulated more enterprises to increase investment.

Fourth, investment in some industries with relatively low investment costs has increased.

However, Li is confident about the government's macro control policies, saying that, a full implementation of these policies will be very helpful to bring the growth rate of investment under control.

Price Hikes: An Emerging Problem

The Consumer Price Index (CPI) rose 3.2 percent dur­ing the first six months, due to recent food price hikes driven by the higher costs of grain, meat or poultry prod­ucts and eggs.

The lower price level of last year is a major factor that made the growth rate of the grain price relatively high. Ex­cluding food and energy items, the core price index rose only 0.9 percent between January and June. Despite the surging food prices, industrial producer prices remained basically stable, and general purchasing prices of raw materials, fuel, and power products dropped relatively.

Meanwhile, Li warned that, excess liquidity is prominent, and an overheated real estate market might trig­ger inflation.

Rapid but Stable Increase

Li noted that, first of all, over the past four years, China's macro control policies have shown their effects, in particular in infrastructure construction and improved ba­sic industry. Second, the world economy developed better than expected at the beginning of the year. Third, China's general cut of export rebates and adjustments of the tariff level, in addition to frequently heightened benchmark in­terest rates and required reserve ratio, have all been fac­tored into China's rapid but stable economic development in the first six months.

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