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Tuesday, 17 May 2011

Expert: China's industry continues rapid growth

People's Daily Online
May 17, 2011

Slowdown in industrial growth is reasonable

The growth rate of the industrial added value of Chinese enterprises above the designated size (enterprises with annual sales of more than 20 million yuan) in the first quarter of 2011 was 5.2 percentage points lower than that of the same period of last year. The rate in April was 1.4 percentage points lower than that of March. The Chinese economy has entered a period of steady growth after recovering quickly from the global financial crisis with the help of a stimulus plan. A slowdown in industrial growth is an inevitable result of the ongoing industrial restructuring. Furthermore, there are also some other reasons behind the slowdown.

First, enterprises above the designated size witnessed rapid and considerable growth in industrial added value last year, which was a high base of comparison.

Second, the slow global economic recovery is facing increasing uncertainty. Japan's earthquake, tsunami and nuclear crisis have produced direct and indirect effects on the supply of key components in the automotive, electronics and other industries, and have affected China's industrial output to a certain degree.

Third, some industries are faced with the increasingly serious problem of overcapacity. Due to the central government's strict real estate control measures, domestic consumption dropped for items such as household appliances, furniture and building materials, which are closely related to the property industry, and some preferential policies and subsidy plans for auto purchases were terminated. As a result, the domestic demand for certain industrial products declined, and the steel, building materials, automobile, and some other industries are facing growing pressure from overcapacity, which affected the country's industrial growth to some extent.

Fourth, rising costs of factors of production and the global surge in the prices of energy and raw materials have placed domestic industrial enterprises under considerable pressure and caused certain industries to grow slower. Due to the imported inflation pressure and high inflation expectations, Chinese currency authorities have tightened up the monetary policy and imposed strict controls on bank loans. As a result, many enterprises, especially small and medium-sized enterprises, are suffering from capital shortages. In addition, the imbalance between energy supply and demand has become more serious because of the rapid development of high-energy-consumption industries.


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