The latest figures from the National Bureau of Statistics (NBS) show that China's macro economy has achieved a successful soft landing, a source with the State Information Center (SIC) was quoted as saying by the China Securities Journal Thursday.

According to Wednesday's figures from the NBS, the gross domestic product (GDP) of China witnessed a growth rate of 9.5 percent in the first half of this year, and the consumer price index (CPI), an important index for inflation during the period only rose by 2.3 percent, lower than the 3.6-percent level for the same period of last year.

China now has witnessed a new type of economic growth mode with a low inflation rate and the cooling-down of fixed asset investment, meaning a successful soft landing of the Chinese economy, the SIC economic prediction department said in a report on the China Securities Journal.

The growth rate of China's economy will stably drop to 8-9 percent with the low inflation rate continuing, the SIC estimated.   

China's economy, which has been growing at an annual rate of about 9.4 percent in the past 27 years, was troubled by the overheating fixed asset investment recently. The government since 2003 has taken a series of policies to curb the too-fast growth of investment as well as prices.

According to NBS figures, in the first six months of this year, the fixed assets investment reached 3.2895 trillion yuan, a year-on-year increase of 25.4 percent, 3.2 percentage points lower than the same period of last year.

The low-level investment in some energy-consuming and high-polluting industries has been curbed, with the investment growth rates in steel, cement and aluminum decreasing remarkably, the SIC said.

The three major driving forces of the economy, namely fixed assets investment, exports, and retail sales of consumer goods, achieved a blazing year-on-year growth rate of 25.4 percent, 32.7 percent, and 12.0 percent respectively.

As the growth rates in all three aspects remain strong while inflation stays low, China's economy will continue its softlanding trend for the whole year, the SIC said.

The SIC advised the country to maintain the stable monetary and financial policies as well as keep an eye on any inflation or deflation trends.

The industrial structure has been improved, investment and consumption streamlined, and the growth rate gap between heavy industry and light industry reduced, the SIC report said.

"The macro-economic growth may slow down in the latter half of this year, but deflation is unlikely to happen," the SIC said.

"We predict that for the whole year, China's economy will maintain a 9 percent growth rate and the consumer price index (CPI) will exceed 2 percent."

The slow-down of the consumer price index and fixed asset investment growth caused by tightened real estate policies, appreciation of the US dollar, and pressure upon Renminbi all make deflation impossible, SIC said.

Consumption is the most optimistic factor pushing forward the economy as China's "baby-boomers" have joined the work force.

In spite of the price hike of raw materials, the prices of ten major categories of commodities including apparels and home appliances have kept dropping since 1998, which implies that the overcapacity of the manufacturing industries remains a serious problem, SIC warned.

"The Renminbi still faces appreciation pressure," SIC said. "Soif China's foreign exchange system is adjusted significantly, the possibility of deflation can not be excluded."

China has passed the stage of fastest economic growth, and the macro-economy has entered a new phase for adjustment.

China should stabilize the current macro-economy policies, accelerate the reform of the Renminbi exchange rate mechanism, and cautiously handle its regulative measures in the real estate industry, it suggested.

(Xinhua News Agency July 22, 2005)