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China grows at 8.2% in first half
BEIJING, China -- Economic growth in China in the first half of 2003 was 8.2 percent, with the SARS outbreak pushing the second quarter down to 6.7 percent, the official Xinhua news agency reports. It quoted the National Bureau of Statistics as predicting full-year growth will top 8 percent, despite the slowdown. That is above the government's own earlier forecast of 7.0 percent, and a recently upgraded prediction of 7.5 percent from investment bank Morgan Stanley. The bureau's deputy director, Qiu Xiaohua, said that after the 9.9 percent pace of the first quarter -- the fastest since 1995 -- the second quarter dropped by 3.2 percent to its lowest comparable level since 1992. "The service sector was hard hit, growing just 0.8 percent," Qiu said, quoted by Xinhua on Thursday.
"SARS had an impact, but it didn't lead to a crisis in the economy," Qiu said, noting that SARS-hit industries were recovering faster than expected. China's growth rate contrasts sharply with that of Asia's biggest economy, Japan, which is virtually stagnant, and the recent decline in South Korea, which slipped into technical recession in the second quarter. Separately, the Ministry of Commerce released statistics showing the flow of overseas direct investment into China hit $30.26 billion in the first half of the year, up 34 percent year on year. According to experts quoted by Xinhua, the SARS outbreak -- which cost more than 800 lives worldwide, most of them in China, Hong Kong and Taiwan -- could have reduced overseas investment inflows by $1 billion in the second quarter. Earlier this week, Beijing's city statistics bureau said growth in the Chinese capital hit 9.6 percent in the first half of this year, outstripping the rest of the country. Xinhua reported the bureau as saying much of the impetus came from the automotive industry, which contributed about half of industrial growth. Property was another big growth area, with housing sales jumping 68 percent, year on year. The bureau said that despite the impact of the SARS outbreak, Beijing's gross domestic product (GDP) rose 9.6 percent year on year to 151.61 billion yuan ($18.26 billion). Qiu Xiaohua said Tuesday that China's growth in 2003 will follow a "U" pattern, with high growth in the first and fourth quarters. He characterized the SARS impact as temporary, regional and limited. Also on Tuesday, Zhu Zhixin, vice-minister in charge of the State Development and Reform Commission, told the financial and economic committee of the National People's Congress that China's rapid first-half growth was attributable to the dynamism of investment and exports. According to Xinhua, Zhu said investment on fixed assets grew more than 30 percent year on year in the six months to June. Exports likewise grew more than 30 percent, led by shipments of machinery and electrical products. China's GDP grew 8.0 percent last year, with the government setting a target for 2003 of 7.0 percent. But investment bank Morgan Stanley last month raised its full year forecast from 6.5 percent to 7.5 percent on the strength of China's export boom and an improving U.S. outlook. In a commentary last month, Morgan Stanley's Hong Kong-based chief economist Andy Xie said there were still considerable risks in China's growth story, pointing in particular to its financial sector. He said deflation and labor market instability were other risks. "Regional imbalances also cast a shadown on the current growth model," he said, noting the gap in per capita income between the richest and poorest provinces was 10 to one. Incomes in the big cities of Beijing, Shanghai and Guangzhou far outstrip those of the western provinces.
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