China's economy passed over a bumpy road last year. Influenced by the global economic crisis, China faces many uncertainties in 2009. Yao Jingyuan, Chief Economist of the National Bureau of Statistics, gave a speech at the 2009 China Mining Merger and Acquisition Forum at Tsinghua University on January 10 about the risks the country faces and the positive factors that still exist in China's economic development. Excerpts follow.
The global financial crisis obviously is having an impact on the Chinese economy, which has been substantially reflected in its exports. In the first half of 2008, China's exports to the United States increased 8.9 percent, which was the first single-digit increase in many years. This was quite rare. In November 2008, China's exports fell for the first time in more than seven years.
What should never be underestimated is the role that imports and exports play in China's economy. In 2007, China's imports and exports accounted for around 40 percent of its GDP. That is to say, the decease in imports and exports largely had to do with the national economy.
The decrease in exports, which was directly linked to industrial production, could finally cause a slackening pace in macroeconomic development. The country's fiscal revenue growth also witnessed a consecutive quarterly drop, namely, 35.5 percent in the first quarter, 31.4 percent in the second quarter, and 10.5 percent in the third quarter.
In a sense, the downward pressure on China's economy is increasing.
Amid the great hardships we are confronted with, I still believe that the general picture of China's economy has not changed.
China's economic performance, in general, depends on four main macroeconomic indicators, namely, the GDP growth rate, employment rate, inflation rate and the balance of international payments.
From January to September 2008, GDP growth rate was 9.9 percent, 2.3 percentage points lower than the same period of 2007, but compared to the average annual increase of 9.8 percent from 1978 to 2007, it was slightly higher.
In terms of the employment or unemployment rate, we had created 9.36 million jobs in the first nine months of 2008, almost meeting the goal of 10 million we had set for the whole year, which is a great achievement amid the economic downturn.
As for the inflation rate, prices in 2007 and 2008 hit a 10-year peak, but the CPI growth rate slowed from the second half of 2008 and dropped sharply in November. Therefore, inflation will not be a problem this year. Our biggest task this year is to maintain growth as the external crisis becomes worse and will have a more severe impact on China's economy.
With regard to the balance of international payments, China's huge trade surplus, imbalance of international payments, and the excess liquidity brought by the former two, have baffled the country for years. But the growth of the trade surplus was much slower in 2008, although it was still mounting. The trade surplus during the first three quarters was $4.7 billion less than the same period in 2007.
China's economic fundamentals have not changed, as the positive factors supporting its growth still exist-namely, industrialization, urbanization, marketization and internationalization.
China's industrialization is advancing at a rapid pace, but is far from full industrialization. Industrialization, for a long time to come, will provide strong support for China's economic development.
Another important factor is urbanization. At the beginning of China's reform and opening-up period, the country's urban population was 170 million. Now, this number has increased to 570 million. The urbanization rate in China now stands at only 44.9 percent, or 45 percentage points lower than in developed countries and 4 percent lower than world's average level. China's urbanization, which will be a powerful engine for the country's economic development, still has much room for improvement.
We have emphasized that we should have confidence in China's economy. Our confidence first comes from our grasp of China's economic fundamentals, and second from the Central Government's stimulus package issued last November.
Under the current complicated situation, we should remain confident, but also be more conscious of the risks and hardships ahead.