Development Under Control

Development Under Control

Before the outbreak of the 2008 global financial crisis, the Chinese Government had already begun to practice macro-control on the economy in the hope of transforming China’s economic mode. The government wanted to avoid high pollution and energy consumption and stimulate domestic demand. These adjustment measures are now taking effect. In the fi rst quarter of 2012, China’s economic growth rate was stable while in fl ation dropped on the whole.

This momentum further proves that the Chinese economy is coming for a “soft landing,” not the “hard landing” some had predicted. This is good news to the world economy. When the Chinese economy takes a healthier way of development, it will contribute more to the world economy.

Chinese entrepreneurs appear to be more optimistic about China’s upward economy. According to the Chinese SME Con fi dence Index issued by Standard Chartered Bank on April 9, in the fi rst quarter of 2012, SME Con fi dence Index is 57.63 percent, up by 3.06 percentage points over the previous quarter. China’s of fi cial purchasing managers’ index for March is 53.1 percent, up by 2.6 percentage points over the beginning of this year.The new order index for March is 55.1 percent, a jump of 4.1 percentage points over the previous month.

It’s good to see China developing with a high economic growth rate, a successful transition in accordance with the Central Government’s macrocontrol plan. Meanwhile, relevant departments should always keep alert to various problems in economic development, particularly new situations erupting under macro-control, to avoid deviation of the control policies.

The macroeconomic statistics released in March revealed that the country’s macroeconomic control is faced with huge pressures. On one hand, the Producer Price Index (PPI) dropped for the fi rst time in 28 months; on the other hand, the Consumer Price Index (CPI) rose by 3.6 percent over the same period of time. The gap between PPI and CPI is expanding.

This is an abnormal phenomenon. The drop in PPI shows insuf fi cient demand from real economy, which makes it difficult for businesses to transfer the pressure of rising upstream costs. The unexpectedly high CPI increase tells that the shadow of in fl ation is retreating reluctantly.

This reminds us China should not be too optimistic in maintaining stable economic growth and curbing in fl ation. When demand-pull in fl ation,currency-related in fl ation and imported in fl ation are retreating, cost-push in fl ation is approaching. The Central Government may have already been aware of this and set out to address it.