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China has successfully maintained a stable price level while realizing high economic growth over the past two years, a phenomenon that aroused great interest at a recent economic forum.
Though China's price index increased from below zero to 0.6 in the first quarter of this year, noted economist Wu Jinglian believed severe inflation is impossible in the near future.
At the China Economists 50 Forum held recently in Hangzhou, capital of east China's Zhejiang Province, Wu attributed this to the pro-active financial policy and the modest monetary policy pursued by the Chinese government.
According to Wu, since large amounts of money went to the capital market instead of the commercial and service market under such policies, they were not reflected as the rise of price index.
Statistics show that since 1998, there has been a gap between the money supply increase and the GDP growth and inflation rate. The amount of money in the gap was actually reflected by capital price hikes in the capital market instead of inflation in the commercial market, Wu pointed out.
He cited as proof the price hikes of share prices two years ago, national debt subsequently and then real estate over the past two years.
However, Wu pointed out, the macro economic policy can do little about capital price hikes or capital bubbles like these.
"The bubbles, once they break up, have a strong impact on the state economy, especially the socially weak group," said Wu, citing Hong Kong's case as an example.
As to the price drop in spite of economic growth these years, Wu believed this is because the general supply overweighs the general market demand.
But, he pointed out, it is still hard to tell whether such a market imbalance is caused by rapid growth of productive forces or consumption drop in the market.
One thing for sure, Wu said, is that China's rapid economic growth rate should be largely attributed to the increasingly vigorous Chinese enterprises, especially those privately-owned ones.
(Xinhua News Agency April 21, 2003)
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