China beats growth forecasts

China's economy grows by a sizeable 8%

China's economy expanded by 8.1% in the first quarter of the year, surpassing expectations.

The growth beat market forecasts of 7.5% and exceeded the government's own target for the year of 7%.

The Chinese economy has maintained a steady growth so far this year, in sharp contrast to the slowdown in world economic growth

Qiu Xiaohua
State Statistical Bureau

The strong growth has been attributed to vigorous government spending, which has helped local businesses to prosper.

"The Chinese economy has maintained a steady growth so far this year, in sharp contrast to the slowdown in world economic growth," said Qiu Xiaohua, deputy director of the State Statistical Bureau.

The country's gross domestic product was 1.99 trillion yuan ($241bn) in the first quarter.

Most economists predict that China's economy will grow between 7% and 8% this year.

Trade surplus

China's trade figures were also better than expected, even though exports in other Asian countries have been hit by the downturn in the US economy.

China enjoyed a trade surplus of $4.8bn with exports up almost 15% to $59.3bn.

Its imports climbed more than 17% to $54.5bn.

Economists believe that China's economy may have been insulated to some degree because it is less dependent on exports of high-tech goods.

Nevertheless, export growth is slowing, compared to the boom last year when exports were increasing by almost 30%.

Clouds gathering

Mr Qiu also acknowledged that there were clouds gathering on the horizon.

"Of course, there are some problems that need attention," he said.

The outcome is not as bad as we have observed in other economies

Yiping Huang
Salomon Smith Barney

"Most importantly, the basis for increasing domestic demand is unstable, the level of difficulty for adjusting the economic structure is increasing and the world economy is slowing."

But he added that China was confident domestic demand would cover any shortfall in the export market.

"China is a house made of bricks," added Yiping Huang, vice president for Asia-Pacific economic and market analysis at Salomon Smith Barney.

"The external sector is slowing down significantly compared to what was achieved last year but obviously the outcome is not as bad as we have observed in other economies," he said.

Economic turnaround

Over the past 20 years, China has transformed itself from one of the world's poorest countries into a rapidly growing economy.

A gradual introduction of structural reforms led to economic growth of 8% during 1978-96. Over that period, the average income per person doubled every 10 years, faster than almost any country in recent history.

Premier Zhu Rongji warned that entry to the WTO would increase unemployment

In 1999, growth slackened to about 7% before climbing up to over 8% in 2000.

As China now prepares to enter the World Trade Organisation (WTO), its government is striving to keep economic growth high to prevent any mass unemployment and possible social unrest.

Premier Zhu Rongji warned China's parliament last month that entry to the WTO could lead to higher unemployment over the next five years.

This is because China must open its markets to foreign competition to join the WTO.

Industry workers are likely to experience dramatic changes as an efficiency drive could lead to cuts in companies' workforces.

Mr Zhu told the parliament ailing state enterprises need to improve management and move towards a modern corporate system in order to compete effectively.

The government also plans to borrow $18bn in the bond market to invest in areas such as oil and gas exploration and a new railway infrastructure.