ECONOMY REPORT - CHINA

Transcription

1 ECONOMY REPORT - CHINA (Extracted from 2001 Economic Outlook) In 2000, China s domestic economy continued to perform well, with improvement in the quality of growth. REAL GROSS DOMESTIC PRODUCT China s economic growth accelerated, and its comprehensive strength was enhanced in The gross domestic product (GDP) for the year was US$1,079.7 billion, representing an 8 percent growth in real terms. Growth in 2000 was 0.9 percent higher than in Growth of the primary secondary and tertiary sectors were 2.4 percent, 9.6 percent and 7.8 percent respectively. At the current exchange rate, China s GDP exceeded US$1,000 billion in 2000 the highest ever recorded. The restructuring of China s agricultural production continued. In 2000, the product mix was further optimised, with grain outputs dropping sharply. With bumper harvests occurring each year from 1996 to 1999, supply of agricultural products exceeded demand, leading to a surplus of products. The regional governments strove to adjust the structure of local cultivation according to market needs. The sown area of cash crops was expanded, accounting for over 30 percent of the total sown area of farm crops for the first time. However, because of severe drought and decreased sown areas, the total output of grain for the year as a whole fell by 9 percent to million tons in Industrial production grew rapidly. In 2000, the total value added for the industrial sector as a whole was US$477.9 billion, 9.9 percent higher than in Significant progress was made in industrial structural adjustment. Production of high-technology and high-value-added products increased sharply. The electronic and telecommunications equipment manufacturing industry became the mainstay of the country s industrial sector. The targets of reforming state-owned enterprises (SOEs) and helping those in difficulty to recover within three years was basically realized. By the end of 2000, 12 out of 14 major industries under the supervision of the state were not making losses or were making profits. Investment in fixed assets increased steadily in China during Investment in fixed assets reached US$393.9 billion in 2000, 9.3 percent higher than in the previous year. Investment in capital construction in the electronics industry and in scientific research as well as in technical services rose by 48.9 percent and 19.2 percent respectively. Investment in technical transformation rose by 13.2 percent. Analysed by region, investment in the western region increased by 14.4 percent, 6.1 percentage points and 0.6 percentage points higher than in the eastern and central regions respectively. Consumption demand went up steadily, along with continued improvement in the standard of living. The total retail sales of consumer commodities was US$412.5 billion in 2000, with a real growth of 11.4 percent. New consumption hot spots such as housing and travel came

2 into being gradually. Expenditures on commercial residential houses purchased by individuals rose by 50.6 percent, accounting for 84.8 percent of all commercial residential buildings sales. Annual per capita disposable income for urban residents was US$758.5, and for farmers was US$ Real growth stood at 6.4 percent and 2.1 percent, respectively, after discounting for price effects. Use of foreign capital was stable in Actual utilized foreign direct investment (FDI) in 2000 was US$40.7 billion, US$4 million higher than in the previous year. The trade surplus narrowed, by US$5.1 billion to US$24.1 billion in INFLATION The central government continued to implement a series of policies for expanding domestic demand. Market prices were targeted to remain stable. The consumer price index (CPI) was up by 0.4 percent in 2000, reversing the two-year declining trend since Calculated by category of commodities, prices for service items rose by 14.1 percent, and for housing by 4.8 percent. Except for the prices of aquatic products and vegetables that rose, food prices continued to decline. On the other hand, influenced by the rise in crude oil prices on the international market, the ex-factory price for industrial products increased by 2.8 percent, and the prices for energy, raw materials, and power by 5.1 percent. EMPLOYMENT The unemployment rate continued to fall. At the end of 2000, it stood at 3.1 percent. A total of million people were employed in China, 5.64 million more than in Of this total, million people were employed in urban areas, an increase of 2.60 million over the preceding year. Progress was made in the implementation of the re-employment project. By the end of 2000, the number of workers laid off in SOEs was 6.57 million, 47,000 more than in During 2000, about 3.61 million workers laid off found new jobs. The social security system was further consolidated and improved in By the end of the year, billion people were enrolled in the unemployment insurance programme, and a total of 1.37 million people received their unemployment insurance on a monthly basis. Nearly million workers and million retired people participated in the basic retirement security programme, and about million people took part in the basic health care programme. BALANCE OF PAYMENT Driven by the fast growth of economy within and outside the economy, and by a series of policies on expanding exports, the country s foreign trade continued to grow well in Total trade reached US$474.3 billion, 31.5 percent higher than in the previous year. The value of exports amounted to US$249.2 billion, up 27.8 percent, and the value of imports was US$225.1 billion, up 35.8 percent, with a trade surplus of US$24.1 billion. Exports of machinery and electronic products stood at US$105.3 billion, up 36.9 percent. Exports of new and hi-tech products stood at US$37 billion, up 50 percent. As for imports, faster

3 growth was seen in resource-type products, machinery and electronic products as well as new and hi-tech products, representing increases of 32.6 and 39.7 percent respectively. Utilization of FDI improved in A total of 22,347 new foreign-invested projects were approved, up 32.1 percent over the previous year. The contractual investment value amounted to US$62.4 billion, and was higher by 51.3 percent. The utilised value of FDI was US$40.7 billion, up by only 1 percent. Overseas construction projects, labour projects, and design and consulting services were all on the rise in Contracts with overseas partners involved US$14.9 billion, up 15 percent over the previous year, and the accomplished business revenue was US$11.3 billion, up 1 percent. Its contribution to total exports was US$900 million, up 35 percent. International tourism developed steadily million overseas tourists visited China in 2000, 14.6 percent more than in Of the total, million were foreigners and million were Chinese compatriots from Hong Kong, Macao, and Taiwan. These represented increases of 20.5 percent and 13.9 percent respectively. Foreign exchange income from international tourism reached US$16.2 billion, up 15.1 percent. A total of million Chinese went abroad in 2000, up 13.4 percent over the previous year, and 5.63 million went on personal travel, up 32 percent. National foreign exchange reserves continued to increase. By the end of 2000, the total amount of foreign exchange reserves reached US$165.6 billion, US$10.9 billion more than a year earlier. EXCHANGE RATE The exchange rate of the RMB was stable in By the end of the year, US$1 equalled RMB, with an appreciation of 12 basis points. FOREIGN DEBT By the end of 2000, with the exception of debt to Hong Kong, Macao, and Taiwan, China s outstanding foreign debt amounted to US$ billion, US$6.1 billion or 4 percent less than at the end of By the end of 2000, outstanding medium- and long-term foreign debt was at US$132.65, US$4 billion less than a year earlier. Outstanding short-term foreign debt was US$13.08 billion, US$2.1 billion lower than in the previous year. In 2000, newly borrowed foreign debt totalled US$14.92 billion. Repayment amounted to US$29.11 billion. Of China s total of US$ billion in foreign loans, foreign loans with sovereignty borrowed by the state departments reached US$48.96 billion, up 3.5 percent over end Foreign debt borrowed by domestic financial institutions reached US$35.56 billion, down 13.1 percent from the previous year. Debt borrowed by foreign invested enterprises was US$46.53 billion, down 1.6 percent. Debt for domestic enterprises was US$13.52 billion, down 8.1 percent. Other debt was US$1.16, down 28.4 percent. FISCAL POLICES

4 The actual amount of fiscal deficit for the central government was less than the budgeted deficit for In 2000, total fiscal revenue reached US$161.6 billion, US$12.6 billion more than the fiscal budget. Total fiscal expenditure amounted to US$191.8 billion, US$9 billion more than the year s budget. The increase in fiscal revenue was attributable to rapid economic growth, enhancement of economic proficiency, and more effective tax collection. In 2001, China s total fiscal revenue is expected to attain US$178.3 billion, US$16.7 billion or 10.3 percent higher than in Total fiscal expenditure will reach US$209.6 billion, US$17.9 billion or 9.3 percent higher than a year earlier. MONETARY POLICY In 2000, China s money supply increased by a moderate amount that helped enhance the liquidity of the banking system. The central bank continued to implement robust monetary policies, using various monetary policy tools to increase money supply. By the end of 2000, the balance of M2, M1 and M0 reached US$1,630.4 billion, US$640.1 billion and US$177.5 billion, 12.3 percent, 16 percent and 8.9 percent respectively higher than a year earlier. The amount of savings deposits and loans increased steadily. By the end of 2000, savings deposits in various forms in all banking institutions totalled US$1,495.2 billion, up 13.8 percent, a growth rate slightly higher than the end-1999 rate. Urban and rural residents savings deposits reached US$776.6 billion, up 7.9 percent. Outstanding loans by all the financial setups amounted to US$1,200.5 billion, representing an increase of 13.4 percent. The amount of medium- and long-term loans rose to US$45.8 billion, US$3.7 billion higher than in the previous year. The central bank tried to use monetary policies, such as reducing the interest rates for savings and loans, enlarging consumer credit, and raising the re-financing limits allowed to small and medium-size financial bodies by the central bank to adjust currency in circulation and moderately increase the money supply. In these ways, the central bank stimulated domestic demand and economic development. MEDIUM-TERM TREND FORECAST In 2001, China will continue to stimulate domestic demand by adopting various macro-economic measures, and to carry out proactive financial policies and prudent monetary policies for the purpose of consolidating and enhancing economic growth. In 2001, the central fiscal authority will distribute US$18.1 billion long-term national construction loans to commercial banks. The national budgeted revenue for the entire year will be US$178.3 billion, while the budgeted expenditure will amount to US$209.6 billion. The central government financial deficits will be limited to US$31.3 billion. The balance of revenue and expenditure of regional governments will be achieved. The positive effects of the financial policies and government investment will help fuel the growth of social investment and consumption expenditure. With the exception of the portion used to develop the western region, newly increased national loans will be used on national projects under construction.

5 The prudent monetary policies will remain in effect. In 2001, M1 is expected to increase by percent, while M2 is expected to increase by percent. The net cash supply will not exceed US$18.1 billion. The government aims at: Improving the strategic adjustment of the economic structure on the basis of systematic and scientific innovation, and making use of information technology to stimulate industrialization. Further strengthening agriculture as the foundation of the economy, by increasing agriculture support and protection and raising farmers income. Promoting the transformation of enterprises operating mechanism, through the strengthening of the management of enterprises, consolidating and enlarging the results of reform and of rescuing SOEs. Accelerating the development of hi-tech industries, by stimulating the development of venture capital, and creating a favourable market environment for the development of hi-tech industries. Stepping up efforts to promote the efficient use of information in the national economy. This will include extensively promoting the application of information technology in various industries, developing electronic government and e-commerce, encouraging the use of information technology in enterprises, building information network infrastructure, expanding the software and integrated circuit industries, and enhancing the capacity of system integration and electronic equipment manufacturing. Accelerating the restructuring and technological transformation of traditional industries. This can be achieved by promoting production of products in short supply such as chemicals, steel and metallurgy, and mechanisms for saving energy and reducing waste. Various efforts will be made to develop new building materials, to accelerate the process of restructuring the automobile industry to economise on water and oil usage, to promote the use of alternative less-polluting fuels such as alcohol fuels, to develop new types of recycled energy and restructure the energy industry, and finally to eliminate outdated equipment, skills, and crafts, and close down enterprises that cannot ensure safe and efficient production while keeping wastage and pollution to the minimum. Actively restructuring and developing service industries, especially tourism, information, accounting, consulting, and legal services, to increase the value-added contribution to GDP and to employment. Preparing for entry into the World Trade Organization by opening further to the outside world. Increasing employment, improving the social security system, and raising the

6 standard of living. Regulating the order of the market-based economy, and creating a better macroeconomic environment. In 2001, the major guidance targets for the national economic and social development areas are as follows: Economic growth rate of 7 percent; Increase in total fixed asset investment of around 10 percent; Rise in consumer price level of 1 to 2 percent; Rise in total trade of around 8 percent; Central government deficit under US$31.4 billion; Total volume of currency issued not more than US$18.1 billion; and Maximum registered urban unemployment rate of 4 percent. During , China will aim at maintaining a fairly rapid growth, while achieving notable improvement in the strategic restructuring of the economy to improve the quality of economic growth to lay a solid foundation for doubling GDP by The major macro-economic targets are as follows: Average yearly economic growth rate of about 7 percent; Maximum registered urban unemployment rate of about 5 percent; Price stability; and Basic balance in international payments. Annex I CHINA: OVERALL ECONOMIC PERFORMANCE GDP and Major Components (percent change from previous year, excepted as noted) Nominal GDP (US$ billion) ,080 Real GDP

7 Total Consumption Private Government Total Investment Merchandise Exports Merchandise Imports Fiscal and External Balances (percent of GDP) Budget Balance Merchandise Trade Balance (fob) Current Account Balance Capital Account Balance Economic Indicators (percent change from previous year, except as noted) GDP Deflator CPI M Short-Term Interest Rate (percent) Exchange Rate (RMB/US$) Unemployment Rate (percent)

8 Population (millions) 1, , , , , , , , ,265.8 Notes: 1 Real Investment in Fixed Assets Growth. 2 Current price. 3 Current price. 4 Three-month interbank rate. Annex II CHINA: FORECAST SUMMARY (percent change from previous year) Official IMF LINK ADB OECD IMF LINK ADB OECD Real GDP 7 (approx.) Exports Imports N.A. N.A. N.A * N.A. N.A * N.A. N.A * N.A. N.A * N.A. CPI N.A N.A Note: * Merchandise trade in US$ terms. N.A. Not available. Sources: IMF forecasts, The World Economic Outlook Database (September 2001). LINK forecasts, Project LINK World Economic Outlook (April 2001). ADB forecasts, Asian Development Outlook OECD forecasts, OECD Economic Outlook (June 2001).

9 Annex III CHINA: MEDIUM-TERM TREND FORECAST (percent) Real GDP 7 CPI 3.5 Source: