They say the remainder of the year will see more advantages than disadvantages as the central government continues to implement a pro-active fiscal policy and sound monetary policy.

"This plays a decisive role in the country's economic development," they aid.

The economists agreed that people's enthusiasm to speed up production before the 16th National Congress of the Chinese Communist Party would also be beneficial to increasing investment and consumption.

Liang Youcai, a senior economist with the State Information Center, said the Chinese economy was also enjoying a favorable external environment after becoming a member of the World Trade Organization in December.

During the first half of the year, China enjoyed a trade surplus of US$14.3 billion.

Meanwhile, the country ushered in US$24.6 billion of foreign direct investment.

Liang said the trend would continue in the second half of the year.

"The Chinese economy is expected to grow 7.7 per cent in 2002," he said.

Bei Hejin, a senior member of the Macroeconomic Research Institute of the State Development Planning Commission, agreed with Liang, adding that the country's economy would continue to grow at 7 to 8 per cent in the coming several years.

Both Bei and Liang believed that the pro-active fiscal policy should not be phased out in the short term.

China has implemented the pro-active fiscal policy for five years. The fiscal policy played a key role in combating the Asian financial crisis and keeping China's economic growth at a higher rate amid the global economic slowdown.

Liang said the policy should be faded out in the long run because the continuous issuing of treasury bonds would increase debt risks.

But this should only be implemented under a number of conditions - if the government can find other measures to replace its fiscal policy and if private investment is strong enough to replace the State's existing investment.

The government will have to do a lot of work to stimulate private investment. Private companies need financial support and need to find profitable areas to invest.

The government should also consider the international economic situation before the fiscal policy phases out.

(China Daily August 2, 2002)