of the Yangtse Delta Region
In the First Half of 2003
Shanghai Flash N° 5/2003 pdf-version
negative impact of SARS (Severe Acute Respiratory Syndrome), the
droughts and floods, China' s economy enjoyed a faster growth
in the first half of 2003. The Yangtse delta region - including
in this term the city of Shanghai and the two provinces of Jiangsu
and Zhejiang - continues to play a locomotive role in the country'
s economy, in particular in the field of the investment and foreign
China' s economy
increased by 9.9% in the first quarter of 2003 compared to the
same period in 2002, which was the highest growth rate since 1997,
while the growth rate in the second quarter fell to 6.5% due to
the effect of SARS. On the whole, the Gross Domestic Product (GDP)
of China rose 8.2% to 5' 005.3 billion RMB in the first half of
2003, an equivalent of 604.72 billion USD (according to the official
Chinese exchange rate: 100 USD = 827.71 RMB).
same period of time, the aggregated GDP of the delta region
climbed to 1' 420 billion RMB (171.6 billion USD), accounting
for 25% (22% in 2001) of China' s total GDP, a remarkable result
compared to its rather low percentages of population (10.9%) and
area (2.2%). Due to the unordinarily rapid increase of exports
and investment in fixed assets, Shanghai, Jiangsu and Zhejiang
have all won the highest growth rates in recent years.
reported a GDP of 282.57 billion RMB (34.14 billion USD) in the
first half of 2003, an increase of 11.4% (10.9% for the whole
of 2002) over the previous year. This was the highest growth rate
since 1998. Jiangsu Province, the second largest provincial
economy in China after Guangdong province, recorded a GDP of 547.03
billion RMB (66.09 billion USD), up 13% and 4.8 percentage points
higher than the national average. The GDP of Zhejiang province
reached 412 billion RMB (49.78 billion USD), up 12.7% (12.3% for
the whole of 2002). Measured by per capita GDP (16,570 RMB, or
2,020 USD in 2002), Zhejiang is the richest province in China.
Consumption: Severely influenced by SARS
by SARS, the country's private consumption slowed down a little,
reflected in the situation of the retail sales. China'
s total retail sales growth went down to 8% in the first half
of 2003 from 8.8% in 2002 and from 10.1% in 2001. In the same
period, retail sales in Shanghai totalled 108.3 billion
RMB (13.08 billion USD), up 8.8% (compared with 9.3% for the whole
of 2002) from the previous year; in Jiangsu it was 171.22
billion RMB (20.69 billion USD), up 12.7% (compared with 12.1%
for the whole of 2002) and in Zhejiang it totalled 150.19
billion RMB (18.15 billion USD), up only 8.6% (compared with 12.6%
for the whole of 2002).
its strongest effect in the service sector. While foreign tourists
were reluctant to visit China during the SARS period, the Chinese
government discouraged domestic travels by shortening the "Golden
Week" holiday at the beginning of May. As a result, tourism,
transportation, catering and other related fields were hard hit
by the epidemic. According to official statistics, passenger transportation
volumes dropped 23.9% during the second quarter, and the volume
of air passenger transportation dropped even by a half. Hotel
occupancy was down to 3-5%, compared to about 70-80% in normal
kinds of key consumer articles, like personal computers, mobile
phones, and even cars and houses, sold well due to upgrading of
the consumption structure in accordance with a steady and fast
increase of personal disposable incomes in recent years. Sales
of sedan cars in China surged 82.4% in the first six months of
the year to 842,800 units. Sedan cars in private ownership in
Jiangsu rose to 200, 500 at the end of June this year from 154,
600 at the end of last year. Sales of sanitation and health products,
sports goods, internet and telephone shopping had actually been
advanced by SARS.
in Fixed Assets: One of the Main Engines of Growth
(after the Asian financial crisis), Chinese economic growth has
been strongly driven by a pro-active fiscal policy, featuring
heavily increased investments in fixed assets, especially in the
field of infrastructure. This situation continued in 2002 and
in the first half of 2003 in particular, since all of local legislative
and government organs were re-elected earlier this year and many
officials tended to show their ambition in their economic plans
934.8 billion RMB (about 234 billion USD), enacted investments
in fixed assets for the whole of China grew at an extraordinary
rate of 31.1% during the first six months over the same period
of last year, recording the fastest growth since 1994.
In the delta
region, investments in fixed assets accelerated in the first half
of 2003 as well: in Shanghai, they reached 110.88 billion
RMB (corresponding to 26.08 billion USD), a rise of 21.2% (up
8.2% for the whole of 2002); in Jiangsu they totalled 211.73
billion RMB (46.5 billion USD), a rise of 26.9% (up 16.5% for
the whole of 2002) and they recorded 156 billion RMB (41.78 billion
USD) in Zhejiang, an increase of 46% over the previous
year (up 24.9% for the whole of 2002).
Investment: Accelerating Influx
the preferred destination for foreign investments, surpassing
the United States for the first time in 2002. Foreign direct investment
(FDI) in China totalled 52.743 billion USD, an increase
of 12.5% over the year. This momentum has continued in the first
half of 2003. Contracted FDI in China increased 40.3% to 50.96
billion USD over the same period of 2002, while actually utilized
FDI reached 30.26 billion USD, up 34.3%. The number of newly approved
foreign invested companies rose 22.3% to 18,877 in this period.
However, foreign direct investment in China fell sharply to 3.1
billion USD in July and 3.3 billion USD in August, down 37.5%
and 28.3% respectively from the same months last year. This new
development caused close attention by China observers.
are moving more and more of their manufacturing bases from Southeast
Asia to China. By the end of July 2003, there were more than 446'
441 foreign invested enterprises in China, with contractual foreign
investment of 887.231 billion USD and actual foreign investment
of 481.320 billion USD. It is important to realize, however, that
more than 60% of the capital under the heading of FDI is still
coming from different Chinese sources.
delta region saw an accelerating influx of foreign investment
since 2001. The total FDI of the region was about 13 billion USD
in the first half of 2003 (18.56 billion USD in the whole year
of 2002) in terms of actually utilised value, accounting for 43%
(up 35% in 2002 and 30% in 2001) of China' s total. Actually utilised
FDI in Shanghai was 3.34 billion USD (5.03 billion USD
in 2002), an increase of 44.5 % over the same period last year
(up 14.5% for the whole of 2002). In Zhejiang it amounted
to 2.17 billion USD (3.16 billion USD for the whole of 2002),
an increase of 63.3% (up 43% in 2002), and in Jiangsu it
reached 7.42 billion USD (10.37 billion USD for the whole of 2002),
an increase of 70.5% (75.4% in 2002). Jiangsu therefore became
the most preferred province for FDI, surpassing Guangdong province
for the first time in the first half of 2003 in terms of both
contracted and actually utilized FDI.
Trade: Another Motor of Growth
show that China's total foreign trade volume increased
by 39% on a year-to-year base to 376.14 billion USD in the first
half of this year (for the whole of 2002: 620.8 billion USD, up
21.8%). Exports rose 34% (22.3% in 2002) to 190.32 billion USD
(325.57 billion USD for the whole of 2002); imports grew more
rapidly by 44.5% (21.2% in 2002) to 185.82 billion USD (295.22
billion USD for the whole of 2002); the trade surplus stood at
4.5 billion USD (30.35 billion USD for the whole of 2002). Low
prices and reasonable quality gave China' s products an edge in
the world market. China has considerably benefited from a weak
U.S. dollar as the RMB is virtually pegged to the US currency.
On the other hand, China's economic boom, the rising demand by
foreign-funded enterprises and by private firms and the reduced
import tariffs and licences as a result of China' s entry to the
WTO have spurred imports.
region held a leading position in China' s foreign trade. The
export value of Shanghai was 21.84 billion USD in the first
half of 2003 (32.06 billion USD for the whole of 2002), an increase
of 50.5% (16% in 2002) compared to the same period of the previous
year. Jiangsu exported goods in the value of 24.52 billion USD
(38.48 billion USD for the whole of 2002), an increase of 48.2%
(33.3% in 2002) and Zhejiang' s exports grew 42% (28% in 2002)
to reach an amount of 18.11 billion USD (29.42 billion USD for
the whole of 2002). The region's total export value reached 64.47
billion USD (100 billion USD for the whole of 2002), accounting
for about 34% (31% in 2002) of China' s total export value.
in the Yangtse delta region increased even faster than exports
in the first half of 2003.
During the first six months this year, Shanghai imported goods
with a value of 27.86 billion USD (40.61 billion USD for the whole
of 2002), an increase of 62.8% (22.1% in 2002) over the same period
last year. Jiangsu imported 22.88 billion USD (31.82 billion USD
for the whole of 2002), an increase of 76.1% (41.6% in 2002) and
Zhejiang' s imports grew 83.9% (27.7% in 2002) to reach an amount
of 9.33 billion USD (12.54 billion USD for the whole of 2002).
The region's total import value reached 60.07 billion USD (85
billion USD for the whole of 2002), accounting for 32.3% (29%
in 2002) of China' s total imports.
balance of Shanghai therefore showed a deficit of 6.02 billion
USD in the first six months this year (a deficit of 8.55 billion
USD in the whole year 2002), reflecting the city' s increasing
demand for foreign goods in the high-tech and higher quality brackets
due to internationalisation in the field of consumer goods, due
to a fast and steady increase in personal income and due to the
growing import demand of foreign-funded enterprises as well. Jiangsu
reduced her trade surplus to1.64 billion USD (6.66 billion USD
for the whole of 2002) and Zhejiang remained the most aggressive
trading province in China with a trade surplus of 8.78 billion
USD, compared to China's total trade surplus of only 4.5 billion
USD in the same period. In 2002, Zhejiang's trade surplus of 16.88
billion USD accounted for 55.6% of China' s total surplus.
Challenges: Old and New
situation in the delta region will remain very dynamic in the
near future. It is estimated by the main Chinese research institutes
and some international financial institutions that China' s GDP
growth rate of this year will be higher than 7.5 %. Another double-digit
increase for the delta region provinces is thus very likely for
the current year as well.
But the challenges
are there as well. The Chinese government is facing a series of
tough challenges, facing not only the sluggish world economy and
an uncertain global political situation, reducing demand from
abroad, but also the deflationary pressures in the home market
marked by slower growth of private consumption and by a considerable
overproduction in many fields. High unemployment rates and a stagnant
rural income growth will very likely continue to challenge government
The most serious
problem, however, remains the high unemployment pressure.
According to official statistics, with 7.95 million registered
unemployed in China's urban areas, unemployment climbed to 4.2%
by the end of June 2003, 0.2 percentage points higher than at
the end of last year and 0.6 percentage points higher than at
the end of 2001. But these figures do not include the "laid-off
workers" (about 4.1 million according to the Chinese official
estimate) and the floating population (about 150 million, concentrated
in big cities like Beijing, Shanghai and Shenzhen, mainly composed
of the jobless rural laborers). Actual urban unemployment is then
estimated at about 7%. The central government has vowed to keep
its registered unemployment rate below 4.5% this year and create
more than 8 million new jobs. This is obviously not enough for
the urban job-seekers, who stand currently at about 30 million
and will grow to 50 million in the next five years, if GDP growth
continues on a level as high as 8%.
s unemployment rate was at 4.77% at the end of July 2003 as reported
by the Shanghai Labor and Social Security Bureau, with a registered
figure of 289,000 persons unemployed. In Jiangsu it was 4.2% and
in Zhejiang 4.3% with 288, 400 persons registered unemployed.
Again, these statistics do not include the "laid-off workers"
and the migrant population, which is totalling 3.7 million out
of the 16 million people in Shanghai.
A second problem
is the rapid increase in the amount of money supply. M2,
the broad measure of money supply that covers cash in circulation
and all deposits, soared by 20.8% (the fastest since August 1997)
at the end of June 2003 and by 20.7% at the end of July (to 20.62
trillion RMB, an equivalent of 2.48 trillion USD) on a year-to-year
basis. New loans lent by financial institutions - a major
driving force of money supply growth - hit 1.78 trillion RMB (an
equivalent of 214 billion USD) in the first half of this year,
close to the total amount of loans (1.85 trillion RMB) granted
for the whole of 2002. This will unavoidably lead to more non-performing
loans under the current credit mechanism of lax internal supervision,
and could in the end lead to a bubble economy, especially in the
field of real estate.
of the Swiss Consular Area
||First half of 2003
Retail Sales of
Direct Investment (during the period)
All statistics not including Taiwan, Hong Kong and Macao.
General of Switzerland
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