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SARS Cannot Shake China's Economy
2004/05/22

  

       To counter the unexpected disaster caused by SARS, the Chinese Government has decided to attach equal importance to epidemic prevention and control and economic development.
   
       The sudden outbreak of SARS has in fact hindered China's economic progress. To maintain the sustained, rapid and sound development of the national economy, the Chinese Government has worked out effective counter-measures on the basis of sufficient estimation of various difficulties and negative influences, and pledged to ensure all its work related to reform, development and stability proceed smoothly.
   
       The SARS epidemic has adversely affected China's tourism, catering, recreational, retail, aviation, exhibition and other service industries, as well as related business sectors. Many analysts worry that if the epidemic keeps spreading, trade and domestic and foreign investment will be affected, which may lead to chain reactions of economic austerity and break China's new economic expansion cycle.
   
       The outbreak of SARS is indeed a disaster. But people have no reason to be overanxious, panic-stricken and pessimistic about China's economic development. In fact, over the past 20-odd years of reform and opening-up, China has suffered many setbacks, including political turbulence, drastic economic fluctuation, the Asian financial crisis and catastrophic flooding. However, the country, always persisting in taking economic construction as the central link, has overcome these temporary difficulties one by one and continued to forge ahead along its set path.
   
       In the short run, some industries, hit by SARS, will entail some losses. However, China, as a large country with a tremendous market, is not confined to a region or dependent on certain industries economically. The country possesses an economic development web and a plural industrial structure, which enhances its capacity to resist crisis. Though the negative influences of SARS will slow down China's economic growth, they will be offset by many positive factors. This will enable the country's economic development to maintain a good momentum. Some people worry that China's foreign trade and investment may decline. Although the country's US$600-billion import and export volume makes up a considerable part of the GDP, the net export volume, standing at hundreds of billions of yuan, accounts for only 2-3 percent of the GDP. Hence, the impact on foreign trade and investment is not decisive. The key lies in expanding domestic demand. So long as China's domestic production maintains steady and sustained growth, domestic purchasing power will not plummet drastically. Furthermore, as the Chinese economy is partially overheated, the sudden attack of SARS may help readjust and cool down sectors that are excessively expanded.
   
       In the long run, China has entered a new cycle of economic development, with the formation of an economic growth mechanism driven by market forces. The 16th CPC Central Committee laid down the grand goal of building a well-off society in an all-round way. China must seize the current strategic opportunity and stick to the central task of economic construction. The attack of SARS on China's economy comes from outside. As it is not a problem arising from the economic structure itself, it will not cause economic crisis or change the country's mode of economic growth, nor will it change the following characteristics of China's economic performance:
   
       First, compared with mature economies, China's comprehensive competitive advantages, such as low-cost labor, universalized education, complete manufacturing and processing industrial setups and a unified domestic market with a tremendous potential, will continue to exist and grow further.
   
       Second, China's high savings deposit rate sustains capital supply and a potential consumption capacity.
   
       Third, the investment and consumption enthusiasm spurred by industrialization, urbanization and modernization is stimulating China's economic growth. Motor vehicles, housing, telecommunication products and a batch of emerging industries have become the country's new economic growth points.
   
       Fourth, guided by the government's macro-control policy, non-public investment has increased vigorously, forming a great demand for investment. Meanwhile, the reform of state-owned assets has created enormous market opportunities for domestic and overseas investors.
   
       Fifth, following the quickened process of economic globalization and attracted by China's rapid economic growth, many transnational companies have linked their long-term development strategies with China's economic development. SARS, as a sudden disaster, will not change investors' expectations of the Chinese market. Moreover, economic globalization cannot be separated from China's economy. Any attempt to cut economic ties with China will harm both sides. Last year, global trade volume grew by only 2.7 percent. China's import and export trade, however, registered a two-digit increase.

       In a word, outside attack will only temporarily affect China's economic growth, investment and consumption. After the epidemic is curbed, China's economic activities will return to normal and may make even further progress. The temporary decline in GDP is not fatal. China's tremendous potential of economic development backs the Chinese people's confidence in defeating SARS.



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