Mainland economic growth hit 7.8 per cent this year, just under the official target, the State Statistical Bureau said yesterday. It reported a steady improvement in economic performance throughout the year as stimulation policies took effect. The Government's target was eight per cent. Economic growth fell one percentage point on 1997 in the fifth consecutive year of slowing growth. But bureau spokesman Ye Zhen said the economy had rebounded in the second half. Industrial growth accelerated from 7.8 per cent in the first half to 8.6 per cent in the third quarter and 11 per cent in the fourth. Mr Ye said inventories of unsold goods had stopped growing by the fourth quarter and began to register a net reduction in November. Red ink at state-owned enterprises showed a declining trend in the second half, he said, although by the end of November losses had totalled 143.9 billion yuan (HK$134.7 billion). Estimated gross profit was 118.4 billion yuan, a drop of 22.1 per cent over the same period last year. 'Their efficiency is not encouraging. The losses are very serious,' Mr Ye said, mentioning in particular the textile and coal sectors. Fixed-asset investment was on target, up 15 per cent, with state-owned institutions investing 2,150 billion yuan, an increase of 22 per cent. 'Accelerated expansion has been a major factor spurring economic expansion,' Mr Ye said. Investment spending rose 10.3 per cent in the first quarter but reached 28.4 per cent and 24 per cent in the third and fourth quarters. Shares of Chinese companies gained after the release of the figures. Shares of state-owned companies listed in Hong Kong - H shares - closed the day up 0.69 per cent, while those of mainland-controlled companies - red chips - rose 0.78 per cent. China notched up a record US$45 billion (HK$347.8 billion) trade surplus during the year, compared with US$40.3 billion last year. But exports were almost unchanged at US$182 billion, against US$182.7 billion in 1997. Exports were rescued by buoyant demand in the United States and Europe that made up for collapsing markets in Asia. Imports were down 3.8 per cent to US$137 billion. The bureau did not give any figures on foreign direct investment but officials expected the figure to reach US$45 billion, compared with US$45.3 billion last year. Efforts to boost domestic demand were disappointing. Retail sales growth increased from six per cent in the first half to 7.5 per cent in the second half. Urban incomes rose 6.8 per cent to an average 5,454 yuan a year. But Mr Ye stressed the real picture of rising sales was muddied by the fact that this year the retail price index fell 2.6 per cent and the consumer price index was down 0.8 per cent but sales growth is measured in constant prices.