China Has Successful Soft Landing

After a decade of rapid develpoment and extremely high inflation, China's economy experienced a soft landing last year. This positive economic situation has continued through the first half of 1997.

1. The national economy has maintained its moderate increase

It's estimated that the GDP in the first half of 1997 will be 3318 billion yuan, up 9.5% over the same period of last year if calculated at comparable prices(the same below), keeping a steady increase.

Summer grain got bumper harvests for 3 straight years. Preliminary data indicated that the total output of summer grain will amount to 123 .9 billion kg, with an increase of 10.8 billion kg over last year. The output of rapeseeds will reach 9.00 million tons, up 0.25 million tons. The bumper harvest in this year has the following reasons: The sown area was enlarged; the sci-tech contents were raised; the climate in the spring was moderate; and the field management work was solid. The production situation for animal husbandry and fishery was also good.

Industrial production kept a steady increase, and the economic benefits got a rise. In the first half of 1997, the value added of industrial enterprises at township level and above was 984. 9 billion yuan, up 11.6%. The ratio of sales to industrial production rose monthly, from January to June, the ratio was respectively 92.36%, 94.26%, 95.02%, 95.21%, 94.99% and 95.49%. The ratio stood at 94.62% in the first half of this year, up 0.69 and 2.26 percentage points over the same priod of last year and the beginning of this year. The industrial economic benefits got a rise in general. The composite index of industrial economic benefits was 84.8% in the first 5 months of this year, up 3.2% over the same period of last year. The total profits of industrial enterprises amounted to 43.3 billion yuan up 35. 8% over the same period of last year.

2. Brisk domestic consumer market with low inflation

Due to the bumper harvest in agriculture, the market supply of some farm products and industrial consumer goods such as grain, meat, eggs, aquatic products and fresh vegetables was plentiful. The consumption of residents was steady, and the growth rate of consumer goods prices was slow. From January to June, RPI and CPI were respectively up by 1. 8% and 4.1% over the same period of 1996. The total retail sales of consumer goods amounted to 1300.6 billion yuan, up 14.1% or a real growth of 12.1% if deducting the price hike.

The domestic market of production goods continued keeping a pattern of balanced supply and demand or supply exceeding demand slightly. The market prices of producer goods were down by 2.8% over the same period of last year.

3. Steady growth of export value

The total export value during the January-June period of this year was 80.8 billion US dollars, up 26.2% over the same period of last year. The total import value was 63.0 billion US dollars, down 0.1%, with a favorable balance of 17.8 billion US dollars, while it was only 0. 9 billion US dollars during the same period of last year. The foreign trade in the first half of 1997 has the following features:
(1)The increase of export was faster than that of processing trade whereas the import dropped.
(2)The export of state owned enterprises grew in step with that of foreign funded enterprises, but the import of state owned enterprises declined.
(3)The export of manufactured goods was faster than that of primary goods, and the import of technology-concentrated commodities and resource commodities increased very quickly.
(4)The diversification of the export market got further development.

4. Overheated real estate investment has cooled down

The total investment in fixed assets in the first half of 1997 was 741.7 billion yuan, up 13.5%, with a real growth of 9.7% when deducting the price hike. The real growth rate was down by 2.5% as compared with that of last year. The investment structure had some active changes:
(1)The investment was strengthened in some sectors such as farming, forestry, water conservancy, coal, power, transportation, postal and telecommunication services.
(2)The increase of investment in western areas was faster than that in eastern areas, the proportion of investment in western areas to total investment was up to 13.2%, while it was 11.9% during the same period of last year.
(3)ăDuring the January-June period of this year, the investment in real estate development was 90.9 billion yuan, down 3.3%, of which, the investment in commodity residential buildings was down by 4.7%. This is a new trend firstly appearing in re- cent years. The reason is that the state took some measures to restrain the blind an quick real estate development, and now the measures are being effected. The emptiness of many commodity buildings in the interior factor resulting in the declining of the real estate development.

5. Well implemented government budget and financial reform

From January to May, the government revenue amounted to 309. 1 billion yuan(excluding debt income, the same below), with an increase of 66.7 billion yuan over the same period of last year, up 27. 5%, the government expenditure was 267.6 billion yuan, up 17.9%. The accounts showed a favorable balance of 41.5 billion yuan.

The financial situation was stable in the first half of 1997. As the interest rates were reduced, and many funds flowed into the stock market, the increase of deposits slowed down. During the January- June period of this year, the newly-increased deposits were 597. 4 billion yuan, the increase was less by 192.3 billion yuan over the same period of last year, of which, the newly-increased savings deposits were 396.9 billion yuan, the increase was less by 177.4 billion yuan. The newly added loans were 394.4 billion yuan, the increase was more by 8. 4 billion yuan over the same period of last year. The monetary policy continued reflecting the intention of moderate control, and strengthened the adjustment to basic currency and M1. By the end of June, the growth rate of M1 was 20.6%, basically approximate to the pre -determined target, M0 up by 19%, M2 up 19.1%. The currency circulation gradually strengthened. By the end of June, the foreign exchange reserves were about 120.9 billion US dollars, keeping a quick increase.

6. Rapid development of the volatile stock market

In the first half of this year, the stock market entered a period of quick expansion. Statistics by the end of June indicated that there were respectively 388 and 360 listed companies in SHSE and SZSE, of which, there were 59 and 90 newly listed companies in SHSE and SZSE. The total circulation shares in the 2 stock exchanges reached 7. 1 billion shares, raising a fund for 49.0 billion yuan. The transaction value in SHSE and SZSE amounted to 3075.2 billion yuan, up 267% over the same period of last year. In April and May, there appeared a phenomenon of over-profiteering. By violating the regulations, some funds were speculated in the stock market. Later, China Securities Supervision and Management Commission strengthened the market supervision and management. Some department concerned took a series of measures to restrain the market speculation. The stock market prices began to drop reasonably. Shenzhen Composite Sub-Index fell from 6103 points (a historically high point) in May, to 5081 points in the end of June, up 1864 points over the end of last year. Shanghai Composite Index fell from 1510 point in May, to 1250 points in the end of June, up 333 points over the end of last year.

In current economy, there are some problems needing attention:
(1)Industrial economic benefits have slight rise, however, the improvement is only preliminary. The base is not solid, and the general situation is not ideal, especially, the unprofitable enterprises are still increasing .
(2)Ăsome enterprises are operating under capacity, and the laid-off workers are rising.
(3)After the bumper harvest of summer grain, the purchasing work of summer grain should be well done, and a new prospect should be created, i.e., to stabilize the market prices of grain, and to make farmers increase revenue while the production increased at present, influenced by climate, the production situation of autumn grain in this year is not optimistic. Some flood- control and drought -relief measures should be taken to ensure that the output of grain keeps balanced with last year.