China, riding high on foreign investment deals and rosy export figures,
yesterday said threats to its economy from the Asian financial crisis were overblown.
Chinas plans to overhaul state industry and the housing sector would power the domestic economy, while a huge pool of cheap labour would help exporters, the Business Weekly newspaper said.
Careful study of the deep structure and essential aspects of the Chinese economy demonstrates that fears about its possible stagnation under the impact of the Asian financial turmoil are unfounded, wrote Yao Yuanlong, a researcher with the Institute of Scientific and Technical Information of China.
Chinas latest trade figures defied expectations of analysts, who warned that sharp declines in several Southeast Asian currencies could hit Chinas exports by making goods from those nations cheaper. Beijing notched up a first quarter trade surplus of $10.54 billion. Exports hit $40.1 billion in the first three months, growing a year-on-year 12.8 per cent.
Export growth was off the 15.7 per cent rise in the first two months but showed China was withstanding reasonably well the impact of the Asian financial turmoil on its trade. In a separate article in Business Weekly, prominent economist Zhou Shijian brushed off the effect of Asias woes on Chinas exports.
Chinas history of foreign trade demonstrates the countrys exports are not principally determined by the international economic environment, but are more closely related to domestic economic policies, Zhou said.
Zhou pointed to annual export growth of 18 per cent from 1990-92 when much of the world, including the United States, was in recession.
But exports grew just 1.5 per cent in 1996, a year of fast economic expansion for the rest of the world. The harsh international environment doesnt necessarily mean that Chinas export prospects this year are doomed to be murky, Zhou said.
Yao and Zhou prescribed boosting credits and tax incentives to exporters and using cheap labour from inland areas as ways to maintain robust export growth.
But while Beijing has so far escaped the worst of the Asian crisis, it is struggling to meet a target of eight per cent economic growth for this year.
Worryingly, Premier Zhu Rongji has revealed that first quarter economic growth was 7.5 per cent. In a sign of flagging domestic demand, retail prices were down for the sixth straight month in March, dropping 1.2 per cent from a year earlier. The index was down 1.5 per cent in the first quarter compared with the same 1997 period. Moreover, industrial output for the first three months was lacklustre, coming in at a year-on-year 8.2 per cent, well below the 11 per cent believed needed to keep the economy on track.
To meet the growth target, China has said it plans to spend up to $1 trillion in infrastructure over the next three years. It has also vowed to scrap welfare housing, forcing millions of home buyers onto the market. Beijing has earmarked $29.5 billion for railway investment over the next five years and has pledged to spend $54 billion on telecommunications and more than $56 billion on industrial technology by 2000.
Owing to its size, China can count on its mammoth domestic market to propel economic development rather than relying solely on exports, Yao said.
Chinas economic mandarins have also been cheered by signs that foreign investment, another pillar of the economy, is picking up again after a drastic 24 per cent drop in contracted foreign funds last year.
Beijing signed new investment contracts worth $4.69 billion in the first two months of the year, up 6.76 per cent compared with the same period a year earlier.
Among recent deals were a $4.2 billion petrochemical factory in southern China by the Royal Dutch Shell Group and a $1 billion investment package by US photographic film maker Eastman Kodak.
