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Economic growth continues to go down the slide
30
Aug '08
The present downtrend in the economic growth of China has been largely caused because of a drop in export growth. However, when faced with a weakening international demand, the plunge in growth becomes all the more evident.

Besides, increased investment cost of enterprises, tightening of monetary policy, rising prices of energy and raw material, hike in wages and a host of other decisive factors have negatively impacted the economic growth of China.

Moreover, experts believe that a further slowdown due to declining external demand and rise in domestic production costs would surely inhibit investment growth. Already, the current economic outlook of major export markets like US and EU are weakening, so measures like bringing down the rate of RMB appreciation and increasing the rate of export tax rebate for certain products would only be of limited help in stimulating China's economic growth. As a consequence, it would be increasingly difficult for the country to maintain a growth rate of 11.9 percent achieved in 2007.

Starting from 2000, the economic growth kept on ascending for eight long years and maintained an above 10 percent growth for five consecutive years in the period 2003-07, finally touching a record high of 11.9 percent in 2007.

However, after entering 2008, the growth rate went down the ladder as GDP stood at 10.6 percent in the first quarter marking a drop of 1.1 percentage points. Growth rate in the first half registered at 10.4 percent, down 1.8 percentage points than in the corresponding period last year.

Consumer Price Index (CPI) in the first half rose 7.9 percent, which is much higher than 3.2 percent in the first half of 2007; producer price index (PPI) rose 7.6 percent, also higher than 7.4 percent in January-May. Of which, June PPI rose 8.8 percent, setting a three-year high in growth rates for six consecutive months.

On the other hand, while import growth rate has been on a continuous rise, net export surplus is declining steadily. Export growth in the first half registered 21.9 percent, down by 5.7 percent. In the month of June alone, export growth fell to 17.6 percent, a year on year decline of nearly 10 percentage points. In contrast to this, imports for the month grew 30.6 percent, rising by 12.4 percent over the same period last year while the over all trade surplus reduced to US $13.2 billion from the same time last year.

Although, net exports increased in the first six months of 2008, it was on the whole, lower than the level of the same period in 2007. By the end of June 2008, the balance of accumulated foreign exchange reserves reached $1.8088 trillion, but new inflow of foreign exchange reserves were below the level achieved a year earlier.

From the perspective of trade modes, export growth rate of general trade fell sharply in the first half of 2008, while import growth rate of general trade rose rapidly and trade surplus of net exports of general trade declined dramatically. Even growth of processing trade fell significantly.

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