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back to index backCHINAtalk July,  2005

China's Still On A Roll

The Chinese are learning the capitalist art of spin, as the world's fastest-growing big economy continues to shrug off government attempts to cool it.

Gross domestic product grew at an annualized rate of 9.5% in the first half of this year, the National Bureau of Statistics announced. That is a mere 0.2% slower than in the same period a year earlier, and 1% to 1.5% faster than the government's target for the year.

Masked in the half-yearly figures: The economy grew at a faster lick in the second quarter than it did in the first.

"Stable and rapid growth" is how the Bureau's spokesman described this heady expansion of an economy that saw fixed investment increase 25.4% in the first half, only 3.2% down year-on-year, and still "a bit large," according to the spokesman. Exports jumped 33%, swelling the trade surplus to $39.6 billion.

The bureau noted that companies that had foreign partners or were foreign-owned account for 50% to 57% of the surplus. Among big foreign companies that export from China are Wal-Mart Stores , Motorola and Honda Motor .

That surplus would continue, according to the spokesman, as more of China's trade was accounted for by exports than imports. Er, quite.

Import growth slowed to 14% in the first half, down from a 42.6% growth rate a year earlier. Along with weaker domestic retail sales and lower-than-expected oil demand, that points to a structural weakness in China's economy: lack of domestic demand—just when billions of yuan are being poured into building production capacity. The economy is overheating unevenly.

China has tried to rein in its economy amid fears that it will overheat and has introduced measures such as imposing stricter lending requirements on banks and capping construction projects by regional governments.

Beijing is also trying to cool a housing bubble particularly evident in big eastern seaboard cities like Shanghai. Measures introduced last month include imposing a 5% sales tax on homes flipped within two years. Earlier in the year the Bank of China stopped banks from offering a subsidized rate for home-buying loans.

Annual GDP growth peaked at 9.9% in the fourth quarter of 2003, and, even allowing for the variable quality of China's economic statistics, China's economy is barely slowing. Analysts think 9%-plus growth for the year is likely.

That is not unalloyed bad news, particularly for exporters to China. "We don't see any appreciable slowdown'' in growth in China, General Electric Chief Executive Jeffrey Immelt , said last week. "We continue to see good interest in infrastructure orders. They can't get enough planes.''

And just wait until the building frenzy for the 2008 Beijing Olympic games starts.

Source: Forbes

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Other articles from the same issue (July,  2005).

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China Tightens Employment Regulations for Hong Kong, Macau and Taiwan Nationals Working on the Mainland
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China's Currency Revaluation
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Spanish Government Directs Investment at Western China
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