The improved employment situation in the first half is another factor for the growth of consumption. According to statistics released by the Ministry of Labor and Social Security on July 20, there were 6.29 million new jobs created in the first half, completing 70 percent of the year's goal. By the end of June, the registered unemployed population in urban areas stood at 8.38 million, with the registered unemployment rate declining 0.1 percentage point to 4.1 percent, compared with the same period last year.

Obviously it is a good thing that consumption plays a stronger role in driving economic development, a result Chinese officials want to see most. In the past, the economy was driven by investment and foreign trade, and the Chinese Government made various efforts to enlarge internal demand and increase consumption. From the NBS figures, people can see that the government's efforts have achieved their desired effects.

Problems still persist

Between July 15-17, two days before the release of economic figures to the public, the NBS and the National Development and Reform Commission reported first to the Finance and Economy Committee of the Standing Committee of the National People's Congress (NPC). The latter outlined several of the main problems with the economy. The trend is clearer that economic growth has gone from being a bit fast to being overheated. There are prominent problems with the massive trade surplus and the rapid increase in investment and loans. Growth of high-energy consumption industries is still too fast and the pressure on energy conservation and emission reductions is still high. The pressure of price hikes continues to be intense, especially as prices of food and housing, which are closely related to people's livelihood, are increasing too rapidly. Lastly, the task of guiding a sound development of the capital market remains arduous.

Figures from the NBS show that at the end of May, the balances of broad money (M2) and narrow money (M1) increased 16.74 percent and 19.28 percent respectively, 0.39 percentage point and 0.73 percentage point lower than those at the end of April. But at the end of June, the year-on-year increase of broad money and narrow money were 17.06 percent and 20.92 percent, 0.32 percentage point and 1.64 percentage points higher than those at the end of May. The money supply is faced with pressures to rebound.

In May, renminbi loans increased 247.3 billion yuan, up 37.9 billion yuan over a year before. Compared with the previous months, increases in loans slowed. However, in June, renminbi loans increased 451.5 billion yuan, up 56.6 billion yuan year-on-year.

Investment is also facing pressure to rebound. In the first half, although the growth of total fixed asset investment was 3.9 percentage points lower than that in the same period last year, it was still 2.2 percentage points higher than what it was in the first quarter.

He Liping, Director of the Department of Finance of Beijing Normal University, says that in the first five months, investment grew 25.9 percent. After the central bank raised the interest rate on May 18, investment still grew 25.9 percent in the first six months, indicating that investment still kept a high rate of growth in June.

New macro-controls begin

On July 20, the State Council announced that as of August 15, the income tax rate on savings deposits will be reduced from 20 percent to 5 percent. On the same day, the People's Bank of China, the country's central bank, announced it would raise the benchmark interest rate of renminbi loans and deposits among financial institutions starting from July 21.

This is the first time in the history of China's financial regulatory measures that the interest tax has been reduced at the same time as the interest rate has been raised.

The original intent of imposing an interest tax was to help spur consumption, but the oversupply of capital in the market has forced the government to find ways to increase the amount of money people deposit in banks to ensure economic stability.

"Raising the interest rate and reducing the interest tax are timely responses to the economic situation," said Cai Zhizhou, a researcher at the China Center for National Accounting and Economic Growth of Peking University.

The central bank claims that the adjustment of interest rates this time will help guide a reasonable growth of both money supply and investment, as well as help regulate and stabilize expectations of inflation and maintain stable price levels.

Li Yang, Director of the Institute of Finance and Banking of the Chinese Academy of Social Sciences, believes that the adjustment this time will help hold back further increases of the CPI.

According to Cai, the trend for China's monetary policy will be one featuring "stable but moderately tight" in the near future. Many experts believe that the interest rate will likely be raised again within the year because of inflation pressure and the existence of negative interest rate.

Besides financial regulation, the Finance and Economy Committee of the NPC Standing Committee also suggests that in the second half, land and credit should be strictly controlled and market access standards of environmental protection, security and energy conservation should be strengthened. Moreover, new projects will also be strictly controlled in order to restrain the rapid increase of fixed asset investments.