BEIJING, February 8: Falling exports and foreign investment inflows could suck China in to Asia's economic crisis, Chinese state media reported on Sunday. To prop up the economy and create work for millions of Chinese hitting the job market each year, a prominent state economist appealed to authorities to step up investment. Foreign direct investment hit a record $52 billion last year.``But actual foreign direct investment could well drop this year for the first time in history," the `China Daily' quoted an unnamed senior trade official as saying. Likewise, the paper said few officials believed China's trade surplus this year would match the record $40 billion set last year.``Trade insiders are joking blackly that Chinese traders will spend 1998 taming a whole den of tigers," the paper said, referring to the current Year of the Tiger in the Chinese zodiac.
Contract foreign investment last year, a reliable measure of future trends, plunged 33 per cent in the first 11 months of last year, according togovernment statistics. The `China Daily' said exports last year were boosted by slack domestic demand that encouraged enterprises to sell overseas. Exporters had benefited from lower costs as a result of two interest rate cuts last year. This year, however, prospects for foreign investment and exports, ``have probably never been dimmer", the paper said.
Collapsing currencies in south-east Asia would make exports from the region more competitive, the paper said. It noted that goods from south-east Asia competed head-on with Chinese products in key overseas markets.To make matters worse, south-east Asia, South Korea and Japan, whose economies are all in the doldrums, would not be buying as much from China, the `China Daily' said. Exporters would have to trim costs since China had vowed not to devalue its currency, a tough assignment considering the high level of debt among domestic enterprises.
The paper added that Chinese imports would grow following the abolition of duties on certain high-technologyproducts this year. Imports would also be buoyed by a strong currency.
Separately, the paper quoted Zhang Hanya, a member of a state planning board think-tank, as saying that the government would have to spend more to achieve targeted economic growth this year of 8.0 per cent.
``To reach that goal, fixed asset investment must rise by at least 12 per cent in 1998," Zhang said. The economy last year grew 8.8 per cent and fixed asset investment by 10.1 per cent. Zhang said 20 million jobs would have to be created each year for the next several years as a result of a baby boom in the 1980s. In addition, 10 million surplus rural workers would head to cities each year to look for jobs.
Meanwhile Zhang noted that more than 10 million people had so far been thrown out of work as a result of China's campaign to turn around loss-making state industry. Vice-Premier Li Lanqing has said that China would invest $750 billion in infrastructure in the next three years to stimulate economic growth. ``If they want tosolve the problem of slack demand more quickly, then they will need some kind of stimulation programme," said Daryl Ho, regional economist for Jardine Fleming Asia Research in Hong Kong.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
