Soaring Chinese output may exceed 7% target By James Kynge in Beijing Published: April 10 2002 17:23 | Last Updated: April 10 2002 19:58
China's industrial production rose by a robust 10.9 per cent in the first quarter of this year compared with the same period in 2001, raising hopes that growth this year may confound pessimists and exceed Beijing's target of 7 per cent.
One main reason for the higher-than-expected first quarter figure announced on Wednesday, which compares with a full-year rise in industrial output of 9.9 per cent in 2001, was the unexpected buoyancy of Chinese exports despite sluggish demand in the US, Japan and the EU, analysts said.
Exports climbed 14.1 per cent to $40.84bn (£28.7bn) in the first two months of this year, considerably outstripping last year's 6.8 per cent rise but still down from the stellar 27.8 per cent increase in 2000.
Chinese economists said exports had performed better than many predicted because during a period of belt-tightening people were more likely to snap up competitively priced Chinese goods.
Following four years of either stable or falling production prices, a wide range of Chinese products - from toys, textiles and consumer electronics to semiconductor chips - were now cheaper than anywhere else in the world, economists said.
This situation is structural and may continue for some time. Because there are relatively few bankruptcies in China and many companies are owned at least partly by the government, many loss-making corporations that have folded remain in business.
The result is an oversupply of around 80 per cent of manufactured products, which are then sold at wafer-thin margins, creating fierce competition on prices but often feeble corporate profits.
The Asian Development Bank this week forecast that China's gross domestic product growth would slow to 7 per cent this year, down from 7.3 per cent in 2001, according to official statistics, which many independent economists believe may overstate reality by a few percentage points.
In light of the robust export and industrial production performance, analysts are expected to revise upward their forecasts for the year to above 7 per cent, several Chinese economists said.
They noted that the government still planned to launch Rmb150bn (£12.5bn, $18.1bn) in special bonds to spur investment and general economic activity.
Zhu Rongji, premier, has already forecast first-quarter economic growth of 7.5 per cent, marking a significant rebound from a 6.6 per cent rise in the fourth quarter of last year.
The best-performing area of the economy in the first quarter was private Chinese enterprise and business with foreign investment, economists said.
The lumbering, often inefficient state-owned enterprise sector remained the poorest performer.
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