TO THE POINT: Immediately after the announcement of the first quarter economic performance figure on April 16, the central bank decided to raise the reserve requirement ratio by another 0.5 percentage points to 16 percent, the highest in history, as part of its commitment to enforce tightened monetary policy. It will freeze 200 billion yuan ($28.6 billion) in liquidity and bank loans will be further capped. Officials admitted the Chinese economy is facing overall inflation risk, while government intervention into price hikes did not help reduce surging consumer price index (CPI), which surged 8 percent in the first quarter. The first-quarter export slowdown hurt the gross domestic product (GDP) growth, and the government feared international inflation could be transferred into China through imports. By LIU YUNYUN

First Quarter national Economic Performance of 2008

GDP: up 10.6 percent

According to the preliminary estimation of the National Bureau of Statistics (NBS), the GDP in the first quarter was 6.15 trillion yuan ($879 billion), growing 10.6 percent year on year, which was 1.1 percentage points lower compared with the same period last year. NBS reported the growth rate of industrial production slowed down, coupled with a drop in profits made by enterprises.

Due to the fallout of the U.S. subprime mortgage crisis, China's exports to developed countries in America and Europe fell sharply, directly causing the GDP slowdown. Exports, investment and consumption constitute the three pillars for the national economic development. In an era of global economic recession, China can only count on the other two of the three pillars.

NBS spokesman Li Xiaochao contended that the Chinese economy kept a steady and fast growth, defiant of the international market uncertainties, like subprime mortgage crisis, soaring prices of international primary products, international financial market slump, as well as the ice storm disaster striking south China in the first two months of the year.

CPI: 8 percent

The first-quarter CPI did not come as a surprise. It soared 8 percent year on year, 5.3 percentage points higher than that of the same period last year. Xie Fuzhan, Commissioner of NBS, pointed out risks in overall inflation in early April.

Li Xiaochao admitted the consumer prices were running at a high level, and its growth rate stayed above 6 percent since August last year. Li warned of further price hike pressure due to rising prices of raw materials, fuels, and international primary goods. Li called on the whole society to make concerted efforts to bring down consumer prices. He feared the expectation of price surge would further deteriorate the current supply and demand, which might lead to a stampede in stocking up consumer goods.

National Development and Reform Commission (NDRC), the top economic planner, began to interfere into the market, requiring suppliers to file application to NDRC for price hikes. Though many accused it was against the fundamentals of market economy, the careful government interference and monitor are needed when economy is undergoing troubles, according to Eric S. Maskin, a 2007 Nobel Prize Laureate in economics.

Given the government's commitment to bring down the consumer prices, Li worried it would be very difficult, "as once the price has gone up, it is hard to bring it down, just like people's salary."

Housing prices continued to soar amid debates of a turning point in housing market. The year-on-year growth of the prices for housing in 70 large and medium-sized cities went up by 11 percent, or 5.4 percentage points higher from a year earlier, showing no signs of decrease and making average wage earners' dreams of buying affordable homes more difficult.

Trade surplus: down 10.6 percent

China's exports in the first quarter grew 21.4 percent to $306 billion, dropping 6.4 percentage points year on year, while imports surged 28.6 percent to $265 billion, a rise of 10.4 percentage points compared with the same period last year.

The drastic drop of trade surplus was caused by several factors. Foreign trade is calculated in the U.S. dollars. The fast depreciation of the dollar against the Chinese yuan, up to 10 percent in a year, is part of the reasons leading to the shrinking surplus. Meanwhile, the effect of tightening measures adopted last year targeted at curbing exports gradually took effect this year, such as smashing tax rebates for exporting products and restricting the exports of highly polluting and energy-consuming products. The depressing economic performance of China's major exporting destinations-the United States and the EU-will lead to less demand of Chinese products.

In spite of the export decline, the Ministry of Commerce did not intend to come up with rescue measures for the time being, and urged companies to find new growth points. But Chinese products' presence in emerging markets like South Korea, Association of Southeast Asian Nations, Russia and Brazil grew rapidly. The growth rate of exports to those markets was 4.4, 5, 4.2 and 30.7 percentage points higher respectively than that of the same period last year.

Paid-in FDI: up 61.3 percent

By the end of March, China registered a total of $1.682 trillion in foreign exchange reserves, up 10.1 percent over the end of 2007. The figure is mainly composed of trade surplus and foreign direct investment (FDI), while the latter contributed the most. Paid-in FDI accelerated to $27.4 billion in the first quarter, surging 61.3 percent, featuring a decreasing number of foreign-invested companies but larger capital scale. It demonstrated the quality of FDI has kept on improving. International hot money and revenues brought back by overseas operating companies are also part of the reasons for rising foreign reserves.

Fixed-asset investment: up 24.6 percent

Investment in fixed assets enjoyed steady growth and the proportion of investment in central and western areas increased. In the first quarter of this year, the investment in fixed assets of the country was 2.185 billion yuan ($312 million), a year-on-year growth of 24.6 percent.

The fixed-asset investment in the primary industry grew the fastest of up to 80.8 percent year on year, indicating the investors are keen on making a profit out of the surging food prices. In the same period last year, such investment grew a mere 20.3 percent.

Consumption: up 20.6 percent

Retail sales of consumer goods, one of the momentums driving GDP growth, rose 20.6 percent to 2.56 trillion yuan ($366 billion), 5.7 percentage points higher than the same period last year.

On observing the export decline, the Chinese Government proposes not to depend on the foreign market, but on the domestic market. The sales of vehicles, petroleum and petroleum products, furniture and jewelries all witnessed over 30-percent growth.

The increasing income of both urban and rural residents contributed to the rising consumption, though the majority of the people still complained about the low salaries they earned, plus accelerating inflation. NBS statistics showed per-capita urban disposable income grew 11.5 percent in the first quarter year on year to 4,386 yuan ($627), while rural residents' income grew 18.5 percent to 1,494 yuan ($213). The rising farm product prices, like crops and meat, added more income for farmers.

Cash in circulation: up 11.1 percent

The central bank's repeated efforts in checking excessive liquidity were paid off, resulting in declined growth rate of money supply.

The growth rate of money supply dropped, and the newly increased credits declined slightly. By the end of March, the broad money (M2) was 42.3 trillion yuan ($6 trillion), a year-on-year growth of 16.3 percent, which was 1 percentage point lower. The narrow money (M1) was 15.1 trillion yuan ($2.16 trillion), a rise of 18.3 percent, or 1.6 percentage points lower. The cash in circulation (M0) was 3 trillion yuan ($429 billion), up by 11.1 percent or 5.6 percentage points lower.

(Source: National Bureau of Statistics)

Trade Forum

The 12th Investment and Trade Forum for Cooperation Between East and West China was held in Xi'an, Shaanxi Province, on April 5-9. With the aim of "cooperation between east and west China and mutual supplementation," the forum attracted more than 4,000 investors from over 56 countries and regions.

According to figures released by the Ministry of Commerce, the paid-in capital to China hit $18.1 billion in 2007, up 75.19 percent from a year ago. Among the total, $1.39 billion was spent in the western areas, an increase of 204 percent year on year.

Hi-tech Expo

The 11th China Beijing International Hi-Tech Expo will be held in Beijing on May 20-25. Taking "hi-tech Olympics and scientific and technological innovation" as the theme, the expo consists of 60,000 square meters of hi-tech exhibition, six project promotions, six thematic forums and two special market exchange activities, covering sectors like electronic communications and information technology, circular economy, new media innovations and automobile technology.

Numbers of the Week

11.6% & 11.9%

The verified GDP grew 11.6 percent in 2006 and 11.9 percent in 2007, both of which were 0.5 percentage points higher than the previous estimation, according to the NBS.

4,322

The Supreme People's Court calculated that a total of 4,322 people involving 2,684 cases were convicted of intellectual property right infringement last year, growing around 20 percent year on year.