In the third quarter of 2006 China's gross domestic product
(GDP) grew by 10.4 percent, which is down 0.9 percent from the
second quarter, announced the National Bureau of Statistics (NBS)
today.
"The tendency of the economy to grow a bit too fast is being
brought under control," said NBS spokesman Li Xiaochao.
The growth in the first three quarters was 10.7 percent -- down
0.2 percent from the first half. Industry reported growth of 13
percent compared with 4.9 percent for the primary sector and 9.5
percent for services.
Fixed asset investment totaled 7.19 trillion yuan (US$909.3
billion) in the first nine months -- up 27.3 percent from the same
period last year but 2.5 percent down from the first semester.
China's foreign reserves stood at US$987.9 billion at the end of
September. This is a rise of US$169 billion from the beginning of
the year.
The volume of foreign trade surged to US$1.27 trillion -- up
24.3 percent on the first three quarters of last year.
Retail sales in the first three quarters totaled 5.5091 trillion
yuan (US$696.7 billion), which is up 13.5 percent
year-on-year.
Despite the two-digit economic growth the consumer price index
only inched up 1.3 percent in the first nine months.
Runaway investment has been a major headache for China's
economic planners in the last few months. The country's urban fixed
asset investment posted growth of 31.3 percent -- the highest in
three years -- in the second quarter.
The excessive growth in investment is accompanied by a similar
increase in bank loans. Chinese banks approved new loans worth 2.3
trillion yuan (US$290.9 billion) in the first six months
against a planned quota of 2.5 trillion yuan (US$316.2
billion) for the whole year.
With the economy in danger of overheating the government has
raised the central interest rate as well as deposit reserve
requirements for commercial banks.
The government has also published new land sale rules increasing
land use taxes as well as compensation to those who lose their
property to developers.
High-powered teams were sent to provincial cities to whip into
line defiant local officials whose apparent obsession with high GDP
figures led them to support many illegal investment projects.
In August the State Council publicly criticized Yang Jing, chairman of Inner Mongolia Autonomous Region and his two
deputies, for ignoring macro control policies and failing to stop
an illegal thermal power plant involving 2.9 billion yuan (US$366.7
million) of investment.
A month later, a senior leader from Henan Province in central China, was
sanctioned for failing to stop the construction of an unapproved
university campus occupying nearly 1,000 hectares of land in the
provincial capital of Zhengzhou.
Despite slowing investment analysts have warned that government
must keep up the pressure to prevent it from bouncing back.
"The effect of the macro control policies shouldn't be
overestimated and preventing the economy from overheating should
remain the top policy priority for the next 12 months," said Fan
Jianping, an economist with the State Information Center, a think
tank under the NBS.
The pressure for the yuan's appreciation has been another thorny
issue in the economy.
Though the creeping appreciation of the yuan over past months
has warded off a threat by the US, the largest trading partner of
China, to impose a 27.5 percent punitive tariff on Chinese goods,
the pressure coming with the country's seemingly ever rising
foreign reserves is still intense.
To address the issue the government has eased rigid controls
over foreign exchange, allowing businesses to keep a larger share
of their foreign income and encouraging overseas financial
investment in the form of qualified domestic institutional
investors.
The government has also cut tax rebates on dozens of export
goods in a bid to check their growth. The last effort appears to be
paying off as exports recorded a growth of 26.5 percent in the
first three quarters -- down 4.8 percent over the same period of
2005.
The overall trade surplus, nevertheless, hit a new high of
US$109.85 billion at the end of September. This is higher than the
total of US$101.88 billion for the whole of 2005.
Li Xiaochao attributed this partly to China's low labor costs.
Despite rising wages the labor costs are just 2-3 percent of those
in developed countries.
Other factors included China's large capacity of supply as a
major destination for foreign investment and free movement of goods
and services resulting from globalization.
(Xinhua News Agency October 19, 2006)