GDP up 10pc in first half despite cooling measures

PUBLISHED : Wednesday, 07 July, 2004, 12:00am
UPDATED : Wednesday, 07 July, 2004, 12:00am

Growth increased from 9.8pc in first quarter to an estimated 11.3pc in second

The mainland's gross domestic product grew more than 10 per cent in the first half of the year despite government moves to slow the economy, a top mainland official said yesterday.

Vice-Premier Zeng Peiyan told a BusinessWeek forum in Chongqing that growth would be above 10pc and Beijing's moves to control the economy had achieved some results.

He expected the central government's ability to manage the economy to continue to strengthen.

Separately, a think-tank under the State Development and Reform Commission estimated GDP rose 11.3 per cent year on year in the second quarter and about 10.5 per cent in the first half. The economy grew only 9.8 per cent in the first quarter of this year. Analysts are debating whether the government will be able to engineer a soft landing.

In a report in the China Securities Journal, the development commission's Macroeconomic Research Institute said: 'The positive results are only preliminary. Management of land must be strengthened and the rapid increase in credit to property and certain industries must be controlled.'

Second-quarter GDP growth is widely expected to outpace the first quarter. Earlier this week another think-tank, the State Information Centre, estimated second-quarter GDP at 11.4 per cent.

Lu Deming, dean of the school of economics and finance at Shanghai's Fudan University, said second-quarter growth would be even higher if Beijing had not moved to slow the economy. 'The government's economic policies have shown initial results,' he said.

JPMorgan Chase Bank has just adjusted downward its forecast for second-quarter GDP to 10.8 per cent from 13.8 per cent.

'It appears that recent administrative and monetary-tightening measures have slowed activity more quickly than expected,' the bank said in a report yesterday.

Mr Zeng earlier told the Chinese People's Political Consultative Conference that growth in fixed-asset investment would exceed 30 per cent in the first half, while inflation would be about 4 per cent.

Beijing moved more aggressively to rein in the economy after a 43 per cent rise in fixed-asset investment - a key measure of state spending - in the first quarter. Officials say they are watching inflation indicators to decide whether or not to raise interest rates.

Rapid growth had caused shortages of coal, electricity and oil and strained transport infrastructure, Mr Zeng was quoted by the Ta Kung Pao as telling the CPPCC. Coal stockpiles had fallen to a historic low of 98 million tonnes, while the electricity shortfall was estimated at 20 million kilowatts.

Retail sales rose 12.5 per cent in the first half of this year, helped by sales of cars and property. But Mr Zeng described some consumption as 'abnormal', citing speculation in the property market.