Chinese Economy Grows by 7.8%
- By Andrew Browne
- Dec. 31 1998 00:00
BEIJING -- Pumped up by massive state spending on highways, telecommunications and water works, China's economy grew a remarkable 7.8 percent this year, just off its 8 percent target, figures released Wednesday showed.
Several economists said the figure appeared too good to be true considering Asia was suffering its worst slump since World War II.
They suggested local officials may be inflating the numbers to please Beijing.
The startling growth puts China far ahead of every major Asian economy this year. By contrast, Indonesia's economy was expected to shrink by 14.8 percent in 1998, Hong Kong's by 5.2 percent and Malaysia's by 6.3 percent, according to a Reuters poll this month.
Ye Zhen, the spokesman for the State Statistical Bureau, said at a news conference Wednesday that some data may have been falsified but the final figures were reliable.
"We do not rule out that in compiling data in certain regions, some figures were padded and false reports were made," he said. "But I can responsibly tell everyone that the national figures were compiled after serious checks."
Economic analysts saw trouble to come unless government spending spurred private consumption, which remained stubbornly feeble in 1998, according to a review of the year's economic data by the State Statistical Bureau.
The Retail Price Index, a leading indicator of private consumption, was down 2.6 percent in 1998.
And while the value of exports stayed roughly the same as last year - a feat accomplished by switching sales from Asia to the United States and Europe - economists warned that exports had little room to expand next year.
Friction created by a ballooning trade surplus, which reached a record $45 billion this year against $40.3 billion last year, would inevitably limit sales growth to U.S. and European Union markets, they said.
Exports hit $182 billion in 1998 compared with $182.7 billion in 1997. Imports were down 3.8 percent at $137 billion, which largely accounted for the surplus.
"The GDP figure is still dubious," said Mao Yushi, an economist at the Unirule Institute of Economics, a Beijing-based private research center. "There must be some local governments trying to please the central government by reporting inflated statistics," he said.
The value of GDP in 1998 was 7.97 trillion yuan ($960.8 billion).
Foreign investment - another vital engine of growth along with exports - was also flat. The State Statistical Bureau did not give a figure for actual foreign direct investment for 1998, but a state newspaper said it was $45 billion against $45.3 billion last year.
Still, positive capital inflows have given China foreign exchange reserves of more than $140 billion, spokesman Ye said, without giving an exact figure. The latest figure was $143.7 billion at the end of October.
The trade surplus and the world's second largest stash of foreign exchange have propped up China's currency, the yuan, and Ye repeated Beijing's promise not to devalue.
"China has no need to devalue the yuan next year," he told reporters.
China's Communist government largely depends for its legitimacy on delivering economic growth, and it was worried that missing the GDP target could trigger a loss of confidence in the economy, and possibly ignite social turmoil.