start-up stage, but
has recorded rapid rises, said Assistant Minister
of Commerce Chen Jian.
Figures from the
Ministry of Commerce show outbound investment hit
US$16.1 billion in 2006, rising 31.6% year on
year. Outbound investment topped US$4.27 billion
in the first quarter of this year, up 22.7%. Chen
forecast total outbound investment would reach
US$66 billion by 2010 and jump to about US$30
billion by 2020.
Of
China's three major economic driving forces -
export, investment and domestic demand,
consumption at home is now the priority.
While investment slowed in the first half
of this year, consumption is lending more strength
to economic growth, according to the National
Bureau of Statistics.
Retail sales in the
first half rose 15.4%, 2.1 percentage points
higher than the figure of the same period last
year, bureau spokesman Li Xiaochao said. "The
changes in domestic demand since the beginning of
the year are what we expected," he said.
Li attributed the fast growth in
consumption to the rapid growth in incomes.
"The good performance of Chinese
businesses in recent years and government
subsidies for low-income families and farmers as
well as higher minimum wages for rural workers
helped increase the incomes of urban and rural
people," Li says.
China's rapid economic
growth has brought nearly 200 million people out
of poverty over the past two decades, but the
unbalanced development has also left millions of
the poor struggling with rising educational,
medical and housing costs.
As a result,
Chinese people save huge amounts of money for the
education of their children and for healthcare
costs. This has also fueled investment in the
stock markets as people see better returns on
their money than savings interest income. They are
less inclined to buy things - particularly
expensive imported goods - that are not seen as
necessities.
"This year, we will
completely stop collecting tuition and
miscellaneous fees from all rural students
receiving compulsory education," Premier Wen
Jiabao announced in March this year, adding that
the policy will ease the financial burden of 150
million rural families with children attending
primary or middle schools.
Wen also
announced an ambitious plan to set up "a
nationwide basic minimum cost of living allowance
system" for rural residents, who traditionally had
no access to social security coverage.
Other major spending plans include a 201.9
billion yuan investment from the central
government to improve the social security network,
and a 10.1 billion yuan subsidy from the central
budget to expand the coverage of a cooperative
medicare system to 80 percent of China's rural
areas.
"As the government has put more
into education, medical care and housing, people
are inclined to spend more, resulting in rising
sales of automobiles, consumer electronics,
housing and furniture," Li Xiaochao said.
"China will continue implementing and
improving its macro-economic control policies,
stick to a prudent fiscal and monetary policy and
strive for stable and fast economic progress,"
said the Ministry of Finance.
This means
"the government will continue to rein in
investment in overheated sectors and channel money
towards fields that concern people's livelihoods.
The government will use market mechanisms, such as
interest rate adjustments and reserve requirement
ratios, to strengthen controls in 2007," according
to Wang Xiaoguang, an economist with the National
Development and Reform Commission.
Wang
believes the government will try to reduce the
widening gap between urban and rural areas by
directing more investment into the countryside.
However, he says rural investment will not
increase sharply in the short term, and rural
development will mainly be driven by
industrialization and urbanization.
Despite the central government's use of
macroeconomic policies to rein in overheating
development, Chinese experts largely agree the
entire economy will maintain the momentum of
sustained and fast growth in the next two years.
"This is because China is creating a
favorable environment for the convening of the
17th National Congress of the Communist Party of
China this year and the hosting of the Olympic
Games next year," said Lu Zhongyuan, an expert of
the Macroeconomic Research Institute of the
Development Research Center of the State Council.
Other factors helping boost China's
economy include the improvement of consumption
patterns to upgrade industry, the acceleration of
industrialization and urbanization,
nongovernmental investment and rapid economic
growth in central and western China.
Lu
predicts China's GDP growth in 2007 will be 11%.
In the medium to long term, economic growth will
slow down with GDP growth forecast at 10 to 11% in
2008 before dropping below 10%.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
