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    Greater China
     Jun 2, 2005
Growth cools in Yangtze River region

BEIJING - The Yangtze River Delta region, the fastest-growing area in China, has made progress during the first quarter of 2005 in the readjustment of its economic structure and growth rate by checking the rise of several unhealthy and unstable factors. As result, energy shortages have been relieved, fast economic growth slowed, growth of fixed asset investment slowed, and demand-side consumption is brisk. Overall, the three main factors developing the area - investment, consumption and exports - have been brought into greater alignment.

With the exception of Yangzhou, Zhenjiang and Taizhou, which posed higher GDP growth year-on-year, other cities of the 16 cities in the delta area reported slowdowns in their GDP growth in the first quarter. Within the delta, the rate drop of the seven cities in Zhejiang province was bigger than that of the eight cities in Jiangsu province. The growth in Shanghai municipality was 10.8% in the first quarter of this year, as against 13.5% in the same period last year.

Half of the cities in the area maintained more than 15% GDP growth. Among them, Nantong and Wuxi cities led others by growing at a 15.5% rate, 0.6 percentage points and 1.9 percentage points lower, respectively, than the rate in the previous year. These two cities were closely followed by Suzhou, Zhoushan, Changzhou, Nanjing, Yangzhou and Zhenjiang cities, with growth standing at 15-15.4%.

Suzhou City recorded the biggest drop, some 3.1 percentage points down from the previous year. Seven cities reported a growth rate between 12 and 15%. Of these, Hangzhou and Ningbo recorded growth slowdowns from 15.5% and 15.2% to 13.5% and 12.5%, and Jiaxing and Shaoxing from 16.2% and 15.1% to 14.2% and 13.3%, respectively. Huzhou moved from 18% to 14%, presenting the biggest drop among the 16 cities.

Industrial growth has become more rational. Growth of electric power for industrial use has slowed down remarkably, while the excessive reliance on heavy and chemical industries has improved. Both light and heavy industries are now driving the economic growth in the region.

Consumption of electric power by industry in the Yangtze River Delta area, not including Shanghai Municipality, was 48.2 billion kWh in the first quarter of this year, an increase of 17.8% year-on-year, but still 5.4 percentage points lower than the growth in the same period last year, and 10.3 percentage points lower than the growth of total industrial output value of large industrial enterprises. Among the 16 cities, with the exception of Ningbo, Zhoushan, Taizhou and Yangzhou, which reported increases in the use of electric power by industry, all cities recorded slowdowns.

Under the impact of the state's macroeconomic control measures, fundamental changes have taken place in the supply of resources such as land and electric power. The area saw an across-the-board decline of newly launched foreign-funded projects, with foreign investment scale becoming smaller and the growth in utilization of foreign funds slowing down. The 16 regional cities signed 3,050 contracts on foreign investment in the first quarter this year, 957 less than the same period last year, with contractual foreign funds amounting to US$15.62 billion, down 10.8% year-on-year, and actual use of foreign funds amounting to $6.38 billion, up 6.4%.

Broadly speaking, the roles of investment, consumption and exports in the area's economic growth have become more coordinated. The 16 cities showed a slackening in investment, a stable recovery of consumption, and high exports.

The reliance on investment for economic growth has weakened, although the export-oriented economy still plays a large role in the area. In the first quarter of last year, investment in two-thirds of the cities in the Yangtze River Delta area increased more than 50%. Total investment in fixed assets in the 16 cities reached 302.6 billion yuan, rising 15.5% year-on-year, and down 43.6 percentage points from the same period last year. Among them, seven cities registered investment growth of more than 20%, and three cities reported negative growth. Allowing for price rises, most cities posed lower growth rates in fixed investment than the growth rate of GDP.

At the same time, by contrast, consumption in the delta region has increased steadily. Total retail sales of consumer goods in the 16 cities reached 238.1 billion yuan in the 16 cities in the first quarter, jumping 14.6% year-on-year, and 0.7 percentage points lower than the growth in the same period last year. The gap between growth of investment and that of consumption has narrowed, from 45.9 percentage points in the first quarter of last year to only 0.9 percentage points in the same period this year.

(Asia Pulse/XIC)

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