Business / Economy

Premier focuses on stabilizing growth

By Li Jiabao in Beijing, Diao Ying in London and Qiu quanlin in Guangzhou (China Daily) Updated: 2012-07-11 09:15

Wen stresses role of investment as he meets business leaders, economists

Premier Wen Jiabao, faced with challenging GDP figures, met with economists and business leaders on Monday and Tuesday to discuss ways to boost growth.

Second-quarter GDP growth, expected to be released later this week, is predicted to be around 7.6 percent year-on-year.

Maintaining growth will be the "top priority", the premier said.

"A stable growth rate is not only imperative today, but also a long-term commitment," he said.

Wen pointed out that as a large developing country, China needs to maintain a certain growth to provide adequate support for development and improve the standard of living.

An annual GDP target of 7.5 percent was set earlier this year, down from 9.2 percent in 2011 and 10.4 percent in 2010. But economists say once GDP growth is below 7.5 percent, a large number of jobs may be threatened.

At the moment, Wen said, some "reasonable increase in investment" is more important than, among other things, providing consumer incentives and diversifying exports.

GDP growth has traditionally been driven by government-led investment in fixed assets, consumer spending and exports.

However, he stressed that new investment must be diverted to projects that contribute to improving the overall economy.

He promised more funds for new technology and industries which show strong potential despite sluggish demand.

Company tax structures will also be reviewed, he said.

Rail, public utilities, energy, telecoms, medical services and education will also be open to capital investment.

Investor confidence must be boosted, the premier said.

In a further development, foreign trade fell back to single-digit growth in June. This follows double-digit growth in May and fuels concern about meeting the annual trade growth target of 10 percent.

Trade with the European Union and Japan showed practically no growth, Zheng Yuesheng, spokesman for the General Administration of Customs, said on Tuesday.

Foreign trade expanded 9 percent year-on-year in June, in contrast with 14.1 percent in May.

Exports rose 11.3 percent, down from 15.3 percent in May. Imports rose just 6.3 percent in June against 12.7 percent in May.

The trade surplus in June rose to a three-year high of $31.7 billion.

The first half of 2012 saw foreign trade increase by 8 percent year-on-year. Exports expanded by 9.2 percent to $954.38 billion in the same period while imports gained 6.7 percent to $885.46 billion, yielding a trade surplus of $68.92 billion.

"Provided that the world economy, especially the eurozone debt crisis, does not deteriorate, China's foreign trade is expected to achieve the set goal of 10 percent growth," Zheng said.

"Consumption and exports are the major forces driving China's economic growth," said Wang Haifeng, director of international economics at the Institute for International Economic Research, which is affiliated to the National Development and Reform Commission.

"The trade surplus this year will be smaller than that in 2011 ($155.14 billion), and will drag down GDP growth by about 0.5 percent," he said.

"But China will still be an outstanding economy even with a GDP growth of 7 percent," he said.

Trade with the EU in the first half of this year edged up 0.7 percent to $267.82 billion from the previous year and trade with Japan declined by 0.2 percent to $162 billion in the same period.

"Exports to the EU declined in the first half of this year," Zheng said.

"The US replaced the EU as China's biggest export market in the first half of 2012."

Karel de Gucht, the European trade commissioner, said trade with China is one of the most important ways for the continent to deal with the current debt crisis.

"Europe must emerge on the other side of the crisis as a changed union, stronger and better able to compete," the commissioner said in a speech in London on Monday. "International trade and investment with important partners like China are among the best ways we have to deliver that growth," he said.

"In the future, we expect 90 percent of the growth of the world economy will occur outside of European borders, one third of it in China alone," he said.

Cai Xuqing, general manager of Chaozhou Chenhui Ceramics, said the company's sales dropped by more than 30 percent year-on-year in the first half of this year following weakened demand from European buyers.

"In the whole year, a year-on-year decrease of at least 20 percent is predicted, given that the euro debt crisis is still continuing," he said.

The company ships most of its products to the European market.

"We have begun developing the Middle East market. But the uncertain political situation in the region has also affected our business. We hope the government will provide more information about new markets for exporters," he said.

Sources with the Chaozhou Bureau of Foreign Trade and Economic Cooperation said that the local government will organize exporters to participate in trade fairs in Africa, the Middle East, Russia and Brazil.

Statistics from the Ministry of Commerce showed that China's use of foreign direct investment dropped for six straight months since November and edged up by 0.05 percent in May.

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