By Qi Jingmei (China Daily)
Updated: 2007-11-01 07:21

The National Bureau of Statistics (NBS) released the country's economic indicators for the first nine months last Friday. These figures suggest that the economy is advancing smoothly, and the macro control measures by the authorities have achieved remarkable results in several areas.

According to the NBS statistics, for the first three months of the year, the gross domestic product (GDP) rose by 11.1 percent year-on-year. The rate jumped to 11.9 percent in the second quarter.

To prevent the economy from over-heating, the central government took a series of measures, including new monetary, trade and taxation policies.

These measures hit home quickly. The GDP growth in the third quarter dropped slightly to 11.5 percent

The industrial structure has also shown encouraging changes. Agriculture grew by 4.3 percent in the first nine months, 0.6 percentage points lower than for the same period last year. Industry grew by 13.5 percent, 0.2 percentage points higher year-on-year and the service sector by 11 percent, 1.5 percentage points more than in the first nine months of 2006.

The service sector achieved the fastest growth among all industries, contributing a large proportion to the economy. This is a welcome change, and in line with the country's industrial development strategy. The service sector is less energy-consuming, more labor-intensive and more environment-friendly. Its development will improve the sustainability of the economy.

Another good sign is the upward momentum in consumption. The retail sales volume from July to September was up by 16.8 percent and its growth in the first nine months was 15.9 percent year-on-year. Growth was 2.4 percentage points higher than for the first nine months of 2006, the highest rate since the 1997 Asian financial crisis.

Retail sales are contributing more to economic growth. Annual growth exceeded the GDP growth since 2004. Calculated at current prices, retail sales had contributed 35 percent to economic growth as of September this year, which is 6.6 percentage points more than its contribution for the same period last year.

One of the primary targets of this year's economic policy is to maintain investment in fixed assets at a reasonable level to avoid the economy over-heating. And distribution of investments in different regions and industries is also a matter of high importance for economic soundness.

Overall fixed-asset investments in the first nine months was 9.15 billion yuan ($1.2 billion), 25.7 percent higher year-on-year, and 1.6 points lower than the growth achieved for the same period last year.

The investment growth was mostly achieved in the central and western areas where the economy is less developed than the eastern part.

Investment in the central region rose by 36.2 percent and in the western region by 29.6 percent, 14.8 percentage points and 8.2 percentage points higher respectively than that in the eastern area.

Value-added industrial growth was 18.5 percent in the first three quarters, maintaining its normal growth rate. The high-tech industries expanded more quickly than normal. Businesses in 38 of the 39 industrial categories reported a rise in their profits, several more than 50 percent.

The economic boom has also brought substantial benefits to the people. The average income of urban residents was 10,346 yuan in the first nine months, an inflation-adjusted 13.2 percent growth year-on-year. The average cash income of rural residents was 3,321 yuan, 14.8 percent higher than for the same period last year.

It is the first time since 1997 that the income of rural residents has grown faster than that of urban dwellers. The income growth will significantly improve the lives of the rural population.

A considerable part of the macro control measures in the second and third quarter was targeted against the continuous price hikes in grain, pork and other food stuff.

The Consumer Price Index (CPI) grew by 3.2 percent in the first six months, peaked at 6.5 percent in August, but it dropped to 6.2 percent in September.

The CPI growth has obviously been reined in by administrative efforts to control price rises, and it is likely to be further lowered after the autumn grain is harvested, the pork shortage eased.

However, what is of note, is that the retail price index was on a steep rise in the first nine months. It rose by 3.2 percent in the first three quarters and grew by 4.9 percent in September. The purchase price index of major raw materials, fuel and power, an important indicator of the production costs of the industries, was up by 3.8 percent from January to September.

This is a sign that producer prices are climbing more quickly, which might bring about a price rise in consumer goods and in other industrial output, posing difficulty to maintaining an overall price level.

Property prices, a principal figure for measuring the economy, has also gone up significantly despite changes in fiscal, monetary and other administrative policies. The average property price in the 70 big and middle cities across the country was up by 6.7 percent by September and its growth rate in the three quarters were 5.6 percent, 6.3 percent and 8.2 percent respectively.

Shenzhen in Guangdong Province topped the country's property price growth - 15.7 percent in the first nine months and Beihai in the Guangxi Zhuang Autonomous Region, was next with a 12.1 percent. Beijing ranked third with 10.1 percent growth. Property prices have been propelled by multiple factors - dramatic growth in demand, the high price of land, construction materials, and market speculation of further price rises.

The author is an economist with the State Information Center

(China Daily 11/01/2007 page10)