Review of New Economic and Financial Figures   

China's GDP grew at an annualized rate of 10.6% during the first quarter, compared with 11.7% in the same period of 2007 and 11.9% for the whole year of 2007, according to the State Information Center (SIC). This slow-down was attributed by SIC to factors such as the government adjusting and monitoring the economy, the impacts of January's snowstorm and a plunge in foreign demand. Due to the snowstorm, the growth of industrial production slowed markedly. Exports of some products that consume energy or resources heavily or produce heavy pollution decreased compared with the same period of 2007 - for instance, steel and its preparations, and coke. Overall exports also showed a decline due to the slack US dollar, governmental controls and a slowing global economy. Net exports contributed negatively to the GDP growth. But the growth of investment in fixed assets contributed 6.5 percentage points of the 10.6% GDP growth, still unexpectedly high. Consumption was brisk in the first quarter, but was offset somewhat by big price increases. The CPI was up 8%, mainly due to the snowstorm and Chinese New Year. Inflation worsened with the increased prices of petroleum and grains. Hot money continued a huge net inflow. Over and above the net exports and FDI, another US$85 billion of net inflow cannot be explained.
    SIC also predicted investment will remain hot in 2008 due mainly to four factors: a. The new central and local governments just began their five-year terms, officials will push investment up in order to show publicly their ability and political performance. b. Many business sectors have enjoyed good profits, interesting other investors to join in. c. Public facilities in southern regions that suffered from the snowstorm need to be repaired or rebuilt. d. Managers of industrial and trade firms remain highly confident in the economy.
   According to a report by WIND Information Company, costs for the publicly listed petrochemical firms increased 34.46% in fiscal 2007 on average, while costs for chemical advanced materials firms grew by 44%. Discussions of costs were heavily featured in the fiscal reports of many companies to explain other negative factors. However the gross profit rate for chemical advanced materials firms averaged 49.5% higher than in the preceding year, and the rate for petrochemical firms also gained an average growth of 10.1%. The net profit growth in many pharmaceuticals manufacturers exceeded their sales growth. Losses were suffered by many chemical fibers companies that rely on petroleum, and by the power firms that rely on coal.

Zhong Weike
May 9th, 2008