Industrial performance set to recover

By Tuo Yannan, China Daily, 2012-07-26

China's economy continues to be plagued by the growing losses of domestic businesses, but the situation will improve in the second half of this year, the country's top industry regulator said on Wednesday.

The Ministry of Industry and Information Technology said the economy is still under pressure, as industrial added value posted its slowest growth in nearly three years in the first half of this year — 10.5 percent.

Difficulties faced by companies, especially small enterprises, are increasing, including the rising cost of raw materials, the difficulty of getting financial backing and the consequences of sluggish external demand, said Zhu Hongren, the ministry's chief engineer.

But he added that the slower economic growth this year will ease the pressure from rapid growth that followed the 4 trillion yuan ($634 billion) stimulus package and other past policies.

China launched the stimulus package about three years ago to cushion the blow of the global financial crisis of 2008.

Industrial output grew by 9.5 percent year-on-year in the second quarter of this year, the slowest growth since July 2009, according to figures released by the National Bureau of Statistics.

The figure hit 20 percent about two years ago.

"We can treat the industrial added value growth rate as a barometer of a country's GDP growth," said Xu Hongcai, a senior economist with the China Center for International Economic Exchanges. "Normally, the industry growth index is higher than GDP by 3 to 4 percentage points."

Xu said that although the government has already taken some steps to stimulate the economy, its downward trend is still serious.

"From the perspective of new loans, enterprises' confidence in economic growth is dropping. The government needs to adopt stronger finance tools or policies to spur industry growth," Xu said.

In June, the ministry introduced a new policy to encourage private investment in the telecom industry. The detailed policy will be published soon, the ministry said.

"China needs new growth to stimulate consumption, and the information technology industry will become a big part of that. But the broadband network isn't fully developed yet. The private sector will be encouraged to enter this industry," Zhu from the ministry said.