China's economy in 2004, An interpretation of figures
China's gross domestic product totaled 13.65 trillion yuan (1.65 trillion US dollars) in 2004, a jump of 9.5 percent year on year, the National Bureau of Statistics (NBS) said Tuesday in Beijing.
How to assess the high-speed growth -- "9.5 percent" reflects China's economic growth level quite precisely
How to look upon China's 9.5 percent GDP growth in 2004, which seemed higher than most people's estimations?
Firstly, viewing from development phase, China is right on a track of fast economic growth. Beginning from 2003, the nation put an end to its deflation prevention efforts that lasted five years from 1998 to 2002, and entered a new cycle of growth. Besides, since the reform and opening up in the late 1970s, China's average annual GDP growth is 9.4 percent, almost at the same level with last year's 9.5 percent.
Secondly, this round of macro-control policy works along two lines, checking excessive investment in some sectors on the one hand and encouraging grain production on the other hand. So it's by no means a simply tight policy, let alone all-round austerity. The fundamental aim of macro-control is to smooth out economic fluctuations and to prevent big rises and falls. Its effects had been proved by the national economy growth rates of the four quarters in 2004, which stood at 9.8, 9.6, 9.1 and 9.5 percent respectively, showing a balanced development throughout the year without major fluctuations.
The GDP growth of the fourth quarter of 2004 was 9.5 percent, 0.4 percentage points higher than the 9.1 percent of the third quarter. Although during the fourth quarter the growth speeds of both above-scale industries (i.e. all state-owned or controlled industrial companies as well as non state-owned industrial companies with an annual product sales of 5 million yuan or above) and total investment in fixed assets slowed down, agricultural production increased, especially autumn grain (up 10.35 percent). While seeing a higher added value of the primary industry, the fourth quarter also witnessed fairly fast growth in the tertiary industry (1 percentage points higher in growth speed). Faster developing speeds in the two industries were just an outcome of macro-control measures.
What's more, the Chinese economy enjoys strong internal strength with vigorous investment demands, and consumption also grows exuberant along with a higher living standard and income of the people. Especially, the huge potential of rural market has been continuously tapped as agricultural economy was accelerated and farmers' income kept rising. China's export also benefited from a better international environment as the world economy recovered last year with an estimated record growth rate in recent three decades.
In a word, the investment-consumption-export troika remains a strong driving force of the national economy, which inevitably results in a high growth rate. The final result of 9.5 percent GDP growth reflected both the fruit of macro-control and the level of China's economic development.
How to assess macro-control -- steer China into the best phase of development in more than a dozen years
Judging from figures, the growth rate of 9.5 percent in 2004 was higher than the 9.3 percent in 2003, then had macro-control played a full role?
The macro-control policy bears two major tasks--to curb excessive investment in certain sectors and regions, and to strengthen agriculture, especially grain production. The two-line policy had been properly implemented judging from economic indicators in 2004.
For the first task, investment growth in fixed assets during 2004 first quarter soared to 43 percent, but as state macro-control tightened it dropped back steadily to 27.7 percent for the first three quarters, 28.6 percent for the first half and 25.8 percent for the whole year (1.9 percentage points down year-on-year); investment in the secondary and tertiary industries grew 38.3 percent and 21.6 percent respectively, 8 and 0.5 percentage points down respectively. Investment in some excessively growing sectors slowed down visibly: investment in non-metallic mineral products industry dropped 38.5 percent, in ferrous metal industry 65.5 percent and in nonferrous metal industry 43.5 percent.
For the second task, the country saw an important turn for the better in grain production last year. The whole-year grain production reached 469.5 billion kg, 38.8 billion kg (9.0 percent) higher than the previous year, putting an end to a five-year decline since 1999. Farmers' income also increased rapidly, with the per capita net income rose 6.8 percent in real term, setting a record since 1997.
Li Deshui, director of the State Statistics Bureau, attributed the favorable turn in agriculture to "correct policy, hard work, good climate and high grain price." In the fourth quarter the central authority adopted a series of measures to encourage grain production and bring full play to farmers' enthusiasm. Last year saw an increase of 33 million mu (1mu=2000/3 square meters) seeded area, which contributed 25 percent to the nation's grain production rise, and contribution of higher unit yield was 75 percent. Taking higher grain price into account, farmers got more real benefits from grain growing.
Counting economic and social achievements in 2004, Li once asked himself, "What would be the situation if we let the course go by itself without macro-control?"
His answer is, we might well score a much faster growth rate, but possibly with serious inflation that needs a much bigger adjustment. It is due to the macro-control measures taken timely, resolutely and forcefully by the government that we succeeded in avoiding major fluctuations and, as if by stealth, steering Chinese economy into the best phrase of development in over a dozen years. This is a full demonstration of the central authority's supreme art in economic regulation and of our Party's outstanding capability in handling a market economy.
How to assess the difficulties facing us -- deep-rooted contradictions in economic growth remain an arduous task
The test before China in 2005 is still how to cope with deep-rooted problems in economic growth, since our growth pattern remains an extensive one with a heavy task of structural adjustment.
The favorable trend in agriculture and rural economy last year didn't change the nation's long-term weak agricultural foundation. Room is limited for the four factors leading to even higher grain production this year--bigger seeded area, higher unit yield, stronger financial support and higher grain price, and climate conditions are uncertain. Farmers still face a shortage of channels to increase their incomes.
The year 2004 impressed people deeply by its tight supply of coal, electricity, oil and transportation capacity, and situation this year will be still tougher. In 2004, China's power growth rate reached 15 percent, with 49.3 million kw newly added generation capacity and the total installation capacity reaching over 440 million kw. Although our installation capacity amounts to the total of Britain, France and Germany and higher than Japan's (280 million kw), the GDP we created with it lagged far behind due to our unreasonable economic structure, with too many sectors of high energy consumption.
After all, in 2005 we still enjoy a favorable general economic climate and we can expect continued and stable growth with mild price hike as long as we keep on implementing macro-control measures.
This article by Zhu Jianhong is carried on the sixth page of the People's Daily, January 26, and translated by People's Daily Online
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