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China's Economy: Moderate Growth, Transformation and the Bright Future

By LIU Kan, Consul General of China in Lagos

I have been in Lagos as the Consul General of China for 8 months, during which period I have met leaders of some states and many friends from all circles. I am happy to see that the relationship between China and Nigeria is in its very sound historical period, because the cooperation between the two countries has developed into a higher level and a wider field. Nigerian people cherish traditional friendship towards China, and the exchange between two countries is getting more and more active. In the communication with friends from all circles, many Nigerian friends show great interest in China’s economic growth and pay special attention to China’s economic future and its impact on the relationship between China and Africa, especially between China and Nigeria. Based on the data released by National Bureau of Statistics of China, I am more than happy to take this opportunity to introduce China’s economic growth in the first half of this year to friends from all circles.

In the first half of this year, Chinese economic development was stable in general, restructuring and upgrading made a new progress with a steady pace, and transformation and upgrading of industries maintained a good momentum.

According to National Bureau of Statistics of China, the Gross Domestic Product (GDP) of China in the first half of this year increased by 7.5% at comparable prices, with the first, second and tertiary industries growing by 3.9%, 7.4% and 8.0% respectively. The investment in fixed assets achieved a year-on-year growth rate of 17.3% after deducting price factors. The total value of imports and exports in the first half of 2014 amounted to 2020 billion US dollars, up by a year-on-year growth of 1.2%. Consumption accounted for 52.4% of total GDP, up by 0.2%.

Compared with the two-digit rates in the past several years, the growth rate of 7.5% in the first 6 months of this year might seem lower. This slow-down is attributed to several factors. World economy, which is still on the way to recovery, affects China’s economy negatively, especially in import and export. Secondly, the new cycle of economic structure adjustment, mainly the upgrading and transformation of industries, occurs this year. Thirdly, the central government of China deliberately decelerates the economic development to address some problems accumulated in the previous years when economy grew at two-digit rate. The Chinese government did not carry out large scale economic stimulation programs, but only took micro stimulative measures to boost some specific fields such as agriculture, hi-tech industry, small and medium enterprises, etc.

Despite of the moderate growth rate, from it I still discern some active and positive factors in China’s economic growth. These factors lay a solid foundation for the conclusion that China’s economy will still be on the path of persistent sound development. These were goals of China’s macroeconomic policy and also consist with the economic development strategy of the 12th Five-Year Plan. The central government of China gave the top priority to restructuring and the transformation of economic growth pattern, instead of introducing large scale stimulative policies. Hence, the macroeconomic policies to optimize and restructure the economy yield some positive results.

First, the tertiary industry, which grew at an accelerated rate and made more contributions to China’s economy, demonstrates an encouraging trend toward a better economic structure. In the first half of this year, the tertiary industry grew by 8.8%, while the second industry by 7.4%. The difference fully makes sure that China has succeeded in reducing the excessive capacity in the traditional and energy intensive industries and assiduously developing modern service industries such as logistics and online shopping. As a result, the growth pattern gradually depends less on high energy consumption industries but more on technological and human resources concentrated industries, as is intended by macro economic policy.

Second, the growth of high-tech industry speeded up. In the first six months this year, the added value of the industrial enterprises above designated size went up by 8.8% in China. In contrast, that of high-tech industries increased by 12.4%, 3.6% higher than that of above designated size industrial enterprises. This divergence is brought about by the state policy to stimulate more investment in R&D. There emerged a growing trend towards producing more technology intensive products in China.

Third, investment composition improved and consumption level picked up.

Starting from the beginning of this year, thanks to the macro economic policy, there was an improved composition in investment. The manufacturing sector saw an moderate increase of 13.3% in investment while the tertiary and primary industries witnessed a substantial rise of 19.5% and 24.1% respectively. This investment composition will surely result in a better future industrial structure with more contributions to the economy from agriculture and modern service. Dependence less on traditional manufacture and more on modern service is the aim of restructure of economy encouraged by macro economic policies in China.

The retail sales of consumer goods grew at an accelerated pace. The fact that consumption accounted for 52.4% of total GDP, compared with 52.2% for the same period of last year, highlights the effectiveness of the policy to boost the domestic demand. The retail sales went up faster in rural areas than in urban areas. And on-line shopping increased more rapidly than in-store purchases. Rural consumption, electronic online shopping and other forms of consumption demonstrates the upgrading of consumption structure.

Fourth, prices were kept at a reasonable level and more new jobs were created.

Satisfactory results were achieved in stabilizing prices in the first half of the year with a 2.3% rise of CPI (Consumer Price Index) over the same period of last year. Against the backdrop of slower economic growth, China’s economy created 7.4 million new jobs in the first 6 months this year, which was the most in the history.

Therefore, China is still being in the period of important strategic opportunities, which will last 5 to 10 years or even longer. The per capita GDP of China has reached the level of middle income countries. The histories of economic growth of some East Asian countries demonstrate that a country at the stage of such a per capita GDP will still enjoy moderately high growth rate of 7% to 8% for many years. Some economic driving forces, such as imbalance between the rural and urban developments, disparity between developments of the west and the east, industrialization in a new way and advancing IT application, urbanization and agricultural modernization will persistently bring momentum for economic development in China.

Of course, some of the problems accumulated in the previous years when China’s economy grew at two-digit rate should not be ignored. The 3rd Plenary Session of 18th Communist Party of China Central Committee decided to deepen economic reform to redress these problems with more than 300 measures among which around 80 are being taken this year. China should keep the growth rate at 6% or above in order to fulfill the aim set by the 18th National Congress of the Communist Party of China (CPC). China has set 7.5% as the lowest growth rate that should be guaranteed this year, which is expected to be achieved in the current economic scenario.

All these promising factors make sure that China will acquire a bright economic future.

China needs to develop, and also needs the development of the whole world. In the next 5 years, China will import all kinds of good valued 10 trillion USD, make direct investment of 500 billion USD around the world, and Chinese people will do 500 million overseas travels. All these activities are surely to provide great economic opportunities for the whole world.

“A single flower does not make a spring!” China’s economy is remarkably complimentary to Nigeria’s. Nigeria, the largest economy in Africa, is a very important economic partner of China. Enhancing the economic ties between China and Nigeria benefits both countries.

China is willing to share its fruits and experiences of economic development with all African countries including Nigeria. By the principle of mutual benefit and common prosperity,let’s cooperate to steadily expand the areas of cooperation. I firmly believe China and Africa will be more developed and full of hope and energy in the future.

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