China’s Momentum, Cash Inflow Allows for Internal Development

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Researched by Industrial Info (Sugar Land, Texas)--China’s GDP growth in 2007 is expected to hit 11.2%, up from an earlier estimate of 10% and will reach 10.8% in 2008, up from an initial forecast of 9.8% made in March this year. The Asian Development Bank (ADB) said the faster-than-expected growth momentum built up in 2007 is expected to carry into 2008. The growth rate of 11.5% in the first half of 2007 was the highest rate since 1994. The industrial sectors of steel, electricity, chemicals and oil processing led the growth.

The central government is expected to take more steps to cool rapid investment expansion, and more emphasis will be put on improving energy efficiency and on cutting pollution. Creating jobs for the nearly 8 million rural surplus of people migrating into the cities will remain the priority, as well as on lifting income growth in lagging regions. In 2008, there will be more public investment in education, health care and rural development.

In a move to save energy, the coal-mining industry aims to save 60 million tons of standard coal by using solid waste, coal-mine water and coal-bed methane. By the end of the 11th five-year plan (2006-10), 70% of solid waste should be used in electricity production, and the industry is required to cut its energy consumption per ton by 20% from the 2005 level. Annual coal production is heading for the 2.5 billion ton mark. The 1.1 billion tons produced in the first half of 2007 was one-third of the global total.

In 2007-08, China’s steel production is expected to top 470 million tons, and iron ore imports are expected to fall well under the 400 million tons originally forecast. China’s steel production is now in positive balance over domestic consumption, and the growth in exports has caused some adjustment in global steel trading. Chinese steel imports into the European Union will add up to 10 million tons in 2007. The quality has reached a point where automakers, such as Germany’s BMW, are customers. Curbs to prevent overheating in the steel industry will see growth fall below 10% in 2008. Metals consumption parallels the domestic demands of the swelling ranks of the middle class. Opportunities to make the use of base metals more cost-efficient are being taken in the manufacturing industries with reduction in the profligate use of copper being a current target.

The country’s National Bureau of Statistics (NBS) says China is in the midway of industrialization. In 2006 the industrial sector’s added value to the national economy was $1.2 trillion, up 57.9% from 2002. From 2003 to 2006, the increase of China’s industrial production fluctuated between 11.5% and 12.8%, featuring expanding scale, output and export. China is the global leader in the output of steel, coal, cement, TV sets and cotton fabric, and ranks second in power generation, third in sugar and fifth in crude oil output.

NBS reported that in 2006, the industrial economy accounted for 43.1% of the national economy. The great progress of energy and raw materials industries provides string support to the national economy. Nonferrous and nonmetal mining products, chemicals and machinery industries have also experienced fast development. The weeding out of obsolete production facilities has helped to improve product structure.

Foreign Direct Investment (FDI) grew 12% to $31.9 billion in the first half of 2007, according to the Ministry of Commerce. FDI inflow in 2008 is expected to exceed the $60 billion-plus estimated for 2007. In January to June 2007 18,683 foreign-funded ventures were approved, down 5.4% year over year. The June FDI inflow was $6.63 billion, which was a year-over-year increase of 22%.

The World Bank has called on the Chinese government to use FDI to restructure the economy and promote even development. The bank says the focus should be on raising the education level of the labor force, better protecting intellectual property rights and supporting business research and development to boost the development of the service and high-tech sectors.

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