China's economy kept growing in the first half of the year. However, imbalanced investment structure as well as inadequate consumption has threatened rapid and healthy development.

Investment rises sharply

Investment in the first six months of the year rose sharply. Latest statistics show that fixed-asset investment from January to May reached 1,057.8 billion yuan (US$127.8 billion), up 31.7 percent over the same period last year, the highest growth since 1994.

Experts say that China's investment ratio is a little high. On the other hand, inadequate consumption has become an important factor that slows down national economic growth.

The sharp rise of investment is believed to be caused by several factors. First, China's economy has entered a new economic expansion period. Second, enlarged household spending has offered more areas of investment. With the steady growth in household income and the promulgation of other economic stimulating policies, the new consumption hotspots like housing, vehicles, telecoms and entertainment have driven up relevant investment.

Investment structure

The inconsistency of investment structure has appeared gradually: industrial investment continued its rapid growth, while investment in the primary industry and service sector increased only slightly.

In the first five months, investment in the primary industry increased only 12.4 percent, 17.6 percent less than that of last year. The ratio of agricultural investment in total investments dropped from 3.4 percent last year to 2.9 percent this May. At the same time, fixed-asset investment in the service sector rose 25.8 percent, 2.9 percent less over the same period last year. Its ratio lowered from 65.7 percent to 61.4 percent. Investment in industries like retailing, restaurants, storage and real estate, which were hit hard by SARS epidemic, fell obviously.

Meanwhile, investment in traditional industries has experienced explosive growth. In the first five months, its investment rose 52.7 percent, 27.5 percent higher over the same period last year.

Consumption

Latest statistics from the central People's Bank of China show that saving deposits have reached 9.8 trillion yuan (US$1.18 trillion). Among them, accumulated amounts in the first six months hit 1.1 trillion yuan (US$132.9 billion), rising 19.5 percent over the same period last year.

In the first quarter, although fixed-assets investment kept strong growth, consumption had increased only by 9.2 percent. Influenced by the SARS epidemic, retail sales in April and May rose only 7.7 percent and 4.3 percent respectively, while fixed-assets investment rose 28.9 percent and 34.5 percent during that period.

Experts warn of a deflation crisis once production might exceed demand following continuous growth of investment.

(China.org.cn by Tang Fuchun, July 21, 2003)