China's economic growth faces six problems, including weak consumption and the difficulty in raising farmers' incomes, Qiu Xiaohua, deputy director of the National Bureau of Statistics, said in Shanghai on Saturday.

Mr Qiu Xiaohua is seen in this Octorber 16 photo. Qiu said a weak domestic consumption is harming China's economy growth on August 23. [Xinhua]

Other problems are the lagging service industry, high pressure on employment, rapid increase in the amount of loans and wasteful duplication in the construction industry, he told a forum on enterprise management.

Qiu noted that China's economy is still on the fast track, and the impact of the outbreak of SARS was temporary.

The target of a 7 percent economic growth set for this year is "very possible" to achieve, he said, adding that it may even reach 8 percent.

Analyzing this year's economic development, Qiu said that demand and investment have played a more prominent role in the economy, and the manufacturing industry is its major driving force.

However, Qiu admitted that problems have been exposed in the current course of economic development.

Qiu noted that worldwide, on average, 70 percent of economic growth comes from consumption, while investment contributes only some 20 percent. In China, investment contribution has been 13 percentage points higher than the world's average, while that of consumption is 17 to 18 percentage points lower than the world's average in recent years. The gap is even bigger in this year's economic development, he noted.

Statistics show that in the first half of this year, 70 percent of economic growth came from investments.

According to Qiu, the weak service industry might raise the pressure on employment. In 2003, China's newly added labor force will reach 10 million, including 2.12 million college graduates.

By the end of June, the registered unemployed population had reached nearly 8 million, or 4.2 percent of the total population. In the meantime, the SARS outbreak threw nearly 7 million rural people out of work.

The SARS outbreak also reduced the income of farmers-turned-workers, and depressed the demand for farm produce, thus affecting the income of rural people.

Statistics show that in the second quarter of this year the per capita cash income for farmers decreased by 35 yuan (US$4.23) over the same period last year. In the first half of this year, farmers' per capita income increased by only 3.2 percent over the same period last year, or 2.6 percent after deducting inflation.

Qiu also warned of a trend in a rapid increase in the total size of loans, which stood at 1.76 trillion yuan in the first half of this year. This figure equals the total amount of newly increased loans for last year.

The trend of wasteful duplication of construction has also damaged China's economy, said Qiu, citing the iron-and-steel and textile industries as the worst offenders. Duplication of construction brings exorbitant competition, reduces profits and increases banks' financial risks, Qiu warned.

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