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An Analysis and Forecast of the Economic Situation in 2003-2004
2004-03-12
Zhang Liqun
I. The Main Characteristics of Economic Operation in 2003
1. The economic growth sees steady rise
In spite of the shock of the SARS, China’s GDP growth still reached 9.1%, a 1.1 percentage points higher year-on-year, representing a fairly high degree of growth in recent years. From 2002, China’s GDP growth rate has seen rise for two consecutive years, jumping above 8% from 7-8%. The indexes have indicated that its economic operation has entered a new round of upturn.
2. Investment grows rapidly and consumption structure continues to upgrade
From January to November, the year-on-year growth of fixed asset investment (excluding urban and rural collective and individual investment) rose by 29.6%, an increase of 6.2 percentage points on the basis of a fairly high growth last year. But compared with the January-September period, the growth rate is down by 1.8 percentage points. Affected by SARS, the consumption decreased substantially for a period of time. In June, the growth rate was only 4.3%. But pushed by the upgrade of consumption structure, the annual total retail sale of consumer goods still maintained a fairly high growth. From January to September, the year-on-year growth was 8.9%. After the price factor is deducted, the growth would be 9.2%, which was 1.44 percentage points lower than that of the same period last year. Meanwhile, the consumption structure obviously tends to upgrade. In the first three quarters, urban residents spent 525 yuan on communication and telecommunication, a year-on-year growth of 14.4%; 482 yuan on dwelling, a year-on-year growth of 10.0%. The growth rates under these two items are obviously higher than the total consumption expenditure (7.2% for the first three quarters). It indicates that the dwelling and traveling are becoming more and more of consumption "hot spots".
3. A number of fast-growing industries report robust growth; and the characteristics of heavy industry begin to emerge
From January to November, the four industries – electronic telecommunication equipment manufacturing, communication and transportation equipment manufacturing, electric machinery and metallurgy manufacturing – became the main force propelling the rapid industrial growth. In November, these four industries contributed 46.9% of the industrial growth, pulling the growth of that month by about 8.4 percentage points. In January- November, the output of automobiles and cars respectively reached 4.053 million and 1.806 million, which were a year-on-year growth of 33% and 81.4% respectively. The steel output exceeded 200 million tons, making China the first country in the world that produces more than 200 million tons of steel annually. The added value of the heavy industry accounted for 64.3% of the total industrial added value, a rise of 3.4 percentage points over the annual level (60.95%) in 2002. The trend of a higher proportion of heavy industry in the total industry since 1998 has been further intensified, indicating that China’s economic development has entered a new round of heavy industrialization.
4. Foreign trade grows at a strong momentum
According to initial customs statistics, the total import and export value in 2003 is 851.21 billion US dollars, representing a year-on-year growth of 37.1% in which, 438.37 billion dollars for export representing a year-on-year growth of 34.6%; 412.84 billion dollars for import, representing a year-on-year growth of 39.9%; 25.54 billion dollars for trade surplus, representing a year-on-year reduction of 16.1%. The export surplus with the Unites States and some European countries has continued to increase, and trade friction has been somewhat intensified. As America and Europe are the main export markets of China, this may bring about unfavorable impact on the export growth of China. In recent years, Japan, Republic of Korea and China’s Taiwan Province have gradually moved their plants that produce products to be exported to America and Europe to the Chinese mainland. This is the main reason for the expansion of trade surplus.
5. The demand restraint of down-stream products is still common, but some up-stream products such as coal, electricity, oil and transportation are in short supply
As the domestic market is more active and the export grows faster, the supply-demand pattern is undertaking some changes. The down-stream products such as light industry and textile products, household appliances and cars are still oversupplying the market. But the energy, transportation and some industrial materials tend to be in short supply. From the fourth quarter last year, coal, electricity, oil and transportation faced insufficiency supply, bringing the "bottleneck" problem to the economy. By the end of November, the coal inventory directly supplied to the power plants was decreased by nearly 20%. Some major steel plants and power plants reported shortage of coking coal and power-generating coal. Last year, 22 provinces and municipalities limited power supply by power-cuts. The situation was especially serious in East China and Central China. In Zhejiang Province, the industrial enterprises had to have power cut for two days in a week. The refined oil storage was at the lowest level since the end of 1999. In November, the daily railway request increased from 130,000 cars in the first half of the year to about 200,000 cars, but the daily number of loaded cars could only reach about 95,000.
6. The grain output decreased substantially, and the grain and food prices started to rise
Statistics show that the grain output in 2003 was 860 billion jin, a reduction of 164 billion jin compared with that of 1998, which is far cry from the annual grain demand – 930 billion to 970 billion jin (The total consumption may be calculated differently due to the different figures for farmers’ grain consumption). As a result, the grain and food prices have risen. In November, the grain price index rose by 10.8% (The January-November index was 1.3%); the food price index rose by 8.1% (The January-November index was 3%). The price changes have also pushed up the consumer price index. In November, the index was up by 3% (The January-November index was 1%).
7. The financial revenue increased rapidly and enterprises’ economic returns obviously increased
According to initial estimates, the total financial revenue in 2003 was 2.15 trillion yuan. After the added export tax rebate is excluded, the total revenue increased by 260 billion yuan over the previous year, which was a growth of 12%. The enterprises above designated scale earned 800 billion of profits, which was a growth of 40%.
8. The credit and foreign exchange reserve tend to be stable after being rapidly expanded
By the end of September, the balance of M2 saw a year-on-year growth of 20.7%; the RMB loans from the financial institutions grew by 2.47 trillion yuan over the beginning of this year, which is a year-on-year growth of 1.12 trillion yuan. As a result of regulatory control measures, M2 growth dropped to 19.6% by the end of December; the total loans increased by 2.77 trillion yuan over the beginning of the year, a year-on-year growth of 917.7 billion yuan, indicating a decline of the growth momentum. By the end of September, the foreign exchange reserve reached 383.9 billion dollars, an increase of 97.5 billion dollars over the beginning of the year, a year-on-year growth of 56.2 billion dollars. As the foreign investment growth slowed down, and imports grew rapidly, the trend of reserve growth had also somewhat slowed down. By the end of December, the total foreign exchange reserve was 403.3 billion dollars, a rise of 116.8 billion dollars over the beginning of the year, which is a year-on-year growth of 42.6 billion dollars.
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