The mainland economy grew 7.1 per cent this year as weak domestic demand offset a strong export performance and heavy government spending, official data shows. It was the lowest figure for gross domestic product growth since 1990 and was seen as disappointing, although it exceeded the government's 7 per cent target set at the start of the year. Preliminary figures issued yesterday by the State Statistical Bureau showed that growth fell gradually through the year, from 8.3 per cent in the first quarter to 7.1 per cent in the second and less than 7 per cent in the last quarter. It was the lowest figure since the 3.8 per cent recorded in 1990 and down from 7.8 per cent last year, despite the gradual recovery of the Asian economies which helped to create the third highest trade surplus on record. Economists expect a better performance next year, with forecasts ranging from 7.3 per cent to 8.5 per cent, thanks to higher exports and foreign investment once the mainland enters the World Trade Organisation, and a gradual recovery in domestic demand. Exports this year are estimated to rise by 6 per cent, likely to generate a trade surplus of US$30 billion for the year, down from $43.6 billion last year. Problems this year have been internal, with weak demand from individuals and companies. Consumer prices have fallen for the second consecutive year, despite seven cuts in interest rates since 1996, with people choosing to save rather than spend because they fear for their jobs, pensions, medical insurance and the cost of their children's education. The benchmark retail price index this year fell by 2.9 per cent year on year, while the consumer price index, which includes service prices and rents, was down 1.3 per cent, according to official estimates. Retail sales rose by a nominal 6.8 per cent, and by 10 per cent after adjusting for inflation. Fixed-asset investment, the main indicator of government spending, rose by about 7.8 per cent for the year, down from 14 per cent last year. But investment by companies remained weak because they are cautious about future demand in the economy. Xu Hongyuan, an economist at the National Information Centre, forecast GDP growth of 8 to 8.5 per cent next year. Consumer demand would rise, he said, because of an increase of 30 per cent in wages and pensions of 30 million people, as from September, and government spending of 100 billion yuan (about HK93.34 billion) on infrastructure. 'Traditional industries remain in trouble but new industries like PCs, telecoms equipment, IT, finance, insurance, medicine and education will grow rapidly, pulling the economy with it,' he said. Li Yining, of Peking University, put next year's figure at about 7.5 per cent. 'The economies of Hong Kong, South Korea and other Asian countries will recover, which will help our exports,' he said. 'Entry into the WTO next year will greatly encourage foreign investment and exports. Deflation will end finally in the second half of the year.' Many members of the public did not believe this year's preliminary figures. 'How can the government announce the GDP figure for 1999 when the year has not ended?' said one newspaper vendor. 'It takes the United States two months to compile such a figure. The figure was 7.1 per cent because the government target was 7 per cent. Everyone knows the state firms lie.' One unemployed factory worker standing nearby asked: 'If the economy is doing so well, why are so many people out of work?'