BEIJING - China will
succeed in cooling off its overheated economy and achieve a
soft landing, according to a major Asian Development
Bank (ADB) report. The economy is expected to grow by 8.8%
in 2004 and slow to 8% in 2005, it said.
The
Asian Development Outlook 2004 Update (ADO Update),
which forecasts economic trends in the region, says that
the Chinese government should continue its
macro-economic tightening measures and, in an attempt
to avoid a hard landing for the economy, encourage
investment and growth in lagging sectors like
agriculture, small and medium enterprises, the private
sector, health and education.
"The
rapid pace of investment
growth has slowed from the very high levels experienced
in the first quarter, reflecting the gradual impact
of the policy tightening measures," the report says.
"However, the large amount of construction in progress
means that growth in investment will remain high
at 25% this year and 21% in 2005. In the longer
term, such high levels of investment cannot be relied on
to drive economic growth." Inflation is expected to
moderate from the slightly over 5% experienced in mid
2004.
Consumption is expected to increase by 13% in 2005, supported
by higher urban and rural incomes. Exports are forecast
to rise by 22% in 2004 and 16% in 2005, based on
expectations that the world economy will achieve higher growth
in 2004 than in 2003 and moderate growth in 2005,
and that China will remain the leading destination for global
foreign direct investment. Imports will grow
faster than exports. China's rapidly growing markets are
providing opportunities for other countries, particularly Asian
countries, the report said.
Higher global oil prices
have introduced new uncertainties for economic prospects for
2004 and 2005. The bank report predicts that if
oil prices remain at around $40 a barrel from the
second quarter of 2004 through the fourth quarter of
2005, gross demostic product (GDP) in 2005 will be 0.8
percentage points lower than forecast, the trade balance
as a share of GDP will be 0.1 percentage point lower,
and the consumer's price Index will be 0.5 percentage
points higher.
"The PRC's demand for oil grew by
9% in 2003 to about 270 million tons, or double the 1992
level. Net oil imports in 2003, at 91 million tons, were
more than twice the 1998 level," the report says.
"With continued economic growth and a
rapidly growing number of motor vehicles, the demand for
oil will continue to increase," the report says. "At
the same time, production from the nation's aging oil
fields will decline. Some observers estimate that
oil consumption could reach 600 million tons by 2020,
with 400 million tons imported." China is a very
energy-intensive economy, using over three quarters of a barrel
of oil per $1,000 of GDP, about double the average for
other Asian countries. Increased efforts are needed in
the areas of energy efficiency and energy conservation.
Growth for the first half of 2004 was 9.7%. On
the supply side, the industry sector, including
construction, grew by 11.9% in the first six months.
Agricultural production expanded by 4.9%, after a good
summer grain harvest. The services sector grew by 8%.
"A surge in fixed asset investment and concerns about overheating
in some subsectors prompted the government to
resort to a combination of monetary, fiscal and
administrative measures for damping the economy in
September 2003. Excessive investment was most evident in
the aluminum, automobile, cement, real estate, and
steel subsectors", the Asian Development Bank report says.
"Symptoms of overheating included steep
price increases for raw materials and severe bottlenecks
in power and transportation," it says. "For
example, in the first half of 2004, 24 out of 31
provinces experienced power blackouts, while the railway
system was unable to move all of the freight on time."
The report notes that China has already achieved
the Millennium Development Goal (MDG) of reducing by
half the number of people living on $1 a day, and has
made progress in achieving most of the non-income MDGs,
including providing access to basic education and
reducing maternal mortality.
"More progress is
needed to achieve the MDGs related to gender issues,
HIV/AIDS, safe drinking water in rural areas, child
mortality and environmental damage," the report says.
(Asia Pulse)
Sep 24, 2004
No
material from Asia Times Online may be republished in any form without written
permission.
Copyright
2003, Asia Times Online, 4305 Far East Finance Centre, 16 Harcourt Rd,
Central, Hong Kong
