A slight slowing in the growth rates of GDP and the consumer price index (CPI) in the third quarter has eased the minds of those who worried that the Chinese economy was overheating.

According to statistics released by the National Bureau of Statistics (NBS) on October 25, in the third quarter the growth of China's GDP stood at 11.5 percent, 0.4 percentage point lower than what it was in the second quarter. In September, the growth of CPI stood at 6.2 percent, a decline of 0.3 percentage point from the previous month. Moreover, in the first three quarters, investment and exports grew 25.7 percent and 27.1 percent respectively, a marginal drop of 0.2 percentage point and 0.5 percentage point from the first half of the year.

"The trend for economic development from rapid growth to overheating has been relieved," said Li Xiaochao, spokesman for the NBS.

Effective macro-control

Economists attribute the cooling economy to macro-control measures adopted by the Chinese Government earlier this year. These measures will continue to influence economic trends in the future.

According to Li, this year, the Central Government has adopted a series of timely policies targeting conflicts and problems existing in economic development, and the effect of these macro-control policies is now being felt.

In 2007, structural adjustment measures, mainly monetary policies, have been continuously implemented. From January to September, policies were released each month to raise the deposit reserve ratio or interest rates for savings deposits and bank loans. The deposit reserve ratio has been raised from 9 percent at the beginning of this year to the present 13 percent.

China has also adjusted the structure of imports and exports by changing the export rebate rates in order to curb its surging trade surplus. According to statistics released by the Ministry of Commerce, in the first three quarters, the rapid growth in the export of resources goods and products featuring high energy consumption and high pollution was restrained. Exports of machinery and electrical products as well as hi-tech products still maintained high growth rates, and imports of material products increased.

Song Guoqing, professor at the China Center for Economic Research of Peking University, thinks that because of the high-level money supply, the macro-control measures will be further tightened, which will help maintain the cooling trend of the national economy through the fourth quarter and even next year. In his opinion, the GDP growth may slow to around 11 percent in the fourth quarter.

Consumption drives growth

According to preliminary estimates, in the first three quarters, consumption contributed 37 percent to the overall economic growth, while investment contributed 41.6 percent and foreign trade 21.4 percent.

From January to September, retail sales of consumer goods totaled 6.38 trillion yuan, up 15.9 percent year-on-year, 2.4 percentage points higher than the rate in the same period last year. However, growth of investment and foreign trade declined. In the first three quarters, fixed asset investment increased 25.7 percent over a year ago, 1.6 percentage points lower than the same period last year. The total volume of imports and exports rose 23.5 percent year-on-year, a decline of 0.8 percentage point compared with the same period last year.

"The fast growth of consumption this year mainly comes from the rapid growth in the income of both urban and rural residents, a continuous increase of employment, improving social security, upgraded consumption structure and the formation of new consumption attractions," said Li.

NBS statistics indicated that in the first three quarters, the per-capita disposable income of urban residents was 10,346 yuan, a real growth of 13.2 percent year on year while allowing for price hikes, 3.2 percentage points higher than the same period last year in terms of the growth rate. The per-capita cash income of rural residents was 3,321 yuan, a year-on-year increase of 14.8 percent in real terms, an increase of 3.4 percentage points compared with the growth rate in the same period last year.

Moreover, by the end of September, the number of newly employed people in urban areas had reached 9.2 million, accomplishing 102 percent of the target of 9 million set for the whole year. The increase of employment is conducive to expanding consumption.

According to Li, improved social security has reduced future expenditure pressures on residents and helps to stimulate consumption.

In the first three quarters, 308.9 billion yuan was budgeted for social security and employment, surging 29.5 percent over last year. By the end of September, the urban and rural population subject to minimum life security had increased and the number of participants to various social insurances also increased.