Owing to the effective implementation of a series of macroeconomic policies and stimulus packages aimed at tackling the global financial crisis, positive changes have emerged in China's economic landscape. Composite indices in the first quarter indicate the national economy has witnessed positive changes after experiencing a downturn in the previous months.

To reduce the impact of the global financial crisis to the minimum and curb a possible drastic decline, the Chinese central government embraced a moderately loose monetary policy last November, producing positive results for the national economy.

As a result of the macroeconomic policy, money supply jumped in the first quarter, with supply in the first quarter and supply in the second quarter increasing by 17 percent and 25.5 percent respectively from the same period a year earlier. The lending volumes in the same period hit a historic high, with newly increased loans reaching 4.58 trillion yuan ($586 billion), 91.6 percent of the government's full-year target. The relatively relaxed monetary policy has resulted in huge liquidity for investment and financing for enterprises.

Statistics show that investment into urban and township fixed assets in the previous three months increased by 28.8 percent year on year. The flow of enormous funds into the real economy has expedited national economic recovery.

Of the newly increased investment into urban fixed assets, the lion's share has gone to the first and tertiary industries, in an effort to change the country's previous excessive dependence on the second industry to bolster its economic growth. Also, priority has been given to underdeveloped rural areas and central and western regions in the latest investment campaign.

The huge jump in fixed assets investment should be attributed to some extent to the country's adoption of a proactive fiscal policy. For example, the added 100 billion yuan investment by the central government last year has been implemented, and 110 billion yuan of the added 130 billion yuan for this year has also been initially allotted. Speedy government investment has substantially boosted non-governmental investment in a variety of fields and sectors. Rapid investment growth has benefited a lot from the country's adoption of a relaxed monetary policy. In addition, the country's programs to rejuvenate 10 major industries have also fueled an investment boost in new and infrastructure projects nationwide.

As a result of the concentrated adoption of various kinds of stimulus measures, the country's industrial output in the first quarter achieved a 5.1 percent growth year-on-year. Despite hitting a record low in recent years, the rate still signals that the country's industrial production has hit its bottom and initially shown an upward growth tendency. Industrial output in the first two months only achieved a 3.8 percent growth rate but it reached as high as 8.3 percent in the third month. Positive changes have also emerged in other indexes relevant to industrial production.

Statistics indicate the declining momentum of the country's power generation in the first quarter has been initially curbed, with the growth rate being a negative 2 percent, lower than those of November and December last year.

The slowed power-generation steps, closely related with industrial demand, can serve as a manifestation of the country's industrial recovery. Also, the purchasing managers' index (PMI), an indicator of the economic health of the manufacturing sector, has shown steady growth in the past four months. The PMI index, which was 52.4 in March, is mainly based on such major indicators as new orders, inventory levels, production, supplier delivery and the employment environment. Also, the country's entrepreneur confidence index, or the macro-economic climate index, also reached 101.1, about 6.5 percentage points up from last year's final quarter.

With the continuous growth of a series of macroeconomic indices in recent months, China's consumer demand has also been boosted. In the first quarter, the value of the country's retail sales of consumer goods hit 2.94 trillion yuan, with the actual growth rate being 15.9 percent, a record high since 1986. Such a large boost in consumption indicates that consumers have benefited a lot from the current low prices and the low growth of the national economy. It will play a positive role in helping digest long-stockpiled products and curb a further economic slide.

It is known that consumption contributes more than investment and export to national economic growth. According to the National Bureau of Statistics, the country's gross domestic product in the first quarter was 6.1 percent, of which 4.3 percentage points have been contributed by consumption, testifying to how excessive dependence on investment and export to sustain economic growth has changed.

China's economy has survived the worst period and is now on its way to recovery. With a stockpile of macroeconomic policies and measures further paying off, it is expected to witness an expedited recovery in the latter half of this year despite facing growing pressures ahead.

The author is a senior economic analyst with the State Information Center.

(China Daily 04/22/2009 page8)