Full Report: Chinese Credit Rating Institute Downgrades Us's Credit Rating

Surveillance Report for Sovereign Credit Rating

The United States of America Sovereign Credit Rating:
Local currency/outlook: A+/negative
Foreign currency/outlook: A+/negative
Rating date: November, 2010
Analyst: LU Sinan, DU Mingyan
http://www.dagongcredit.com

Rating History:
Local currency/outlook: AA/negative
Foreign currency/outlook: AA/negative
Rating date: June, 2010

Dagong has downgraded the local and foreign currency long term sovereign credit rating of the United States of America (hereinafter referred to as “United States” ) from “AA” to “A+“, which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment.

The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment. Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors.

The rating bases for downgrading the sovereign credit rating of the United States by Dagong are as follows:

I. The U.S. government has not introspected on the question of the development and management model of the national economy from the global strategic perspective, which makes it very difficult for the U.S. to fundamentally change the passive situation of economic development.

After the outbreak of the financial crisis, the United States government has adopted a series of policies and measures aiming at rescuing the crisis and recovering the economy, such as: the government has purchased bad assets directly, injected capital to financial institutions and entity enterprises seriously hit by the crisis, increased investment in social security, education and energy, cut the tax rate of low and middle income families, and adjusted financial supervision, etc.. Looking at the effects, the U.S. government's efforts have achieved little success, falling short of initial expectations. The credit crunch is still proceeding and even deepening. The development course of credit crisis has shown a chart of debt crisis - economic crisis - monetary crisis - overall crisis. Currently, the U.S. credit crisis has developed into the monetary crisis phase. In order to rescue the national crisis, the U.S. government resorted to the extreme economic policy of depreciating the U.S. dollar at all costs and this fully exposes the deep-rooted problem in the development and the management model of national economy. It would be difficult for the U.S. to find the correct path to revive the U.S. economy should the U.S. government fail to understand the source of the credit crunch and the development law of a modern credit economy, and stick to the mindset of traditional economic management model, which indicates that the U.S. economic and social development will enter a long-term recession phase. The main evidences for this judgment are as follows:

First, the credit expansion policy has changed both the economic fundamentals and the operating mechanism of the U.S. economy. It is a basic state policy of the U.S. to take credit expansion as an engine of economic development. As a result of the highly developed domestic credit policy, the credit relations between the creditors and debtors have become the basic economic relations between social members. In addition, an international credit system, with the U.S. at the core, has been built up on the basis of international credit expansion, and international credit relations have become the basic economic relations between the United States and other members of the international community. Thus, the formation of the U.S. economic foundation has been changed, and credit relations have become a dominant driving force for economic and social development, the paradoxical movement of credit relations determines the direction of U.S. economic and social development. Due to the abuse of credit, the United States became a net debtor country in 1985. From then on, its economic and social activities have been completely based on the huge amount of debts. The status of the creditor-debtor relations not only influences the development model and performance of the U.S. economy, but also constitutes the basis for the nation to choose economic regime and make strategic choices.

Credit expansion has also changed the forming mechanism of United States credit demand, and the market has become the governing force to create the credit demand.

The U.S. globalization of social credit has also reached a high level, 30% of which comes from foreign capital. Therefore, the national capacity to adjust social credit demand through monetary policy instruments such as the money supply and interest rate has been greatly weakened. The change in the forming mechanism of credit demand has fundamentally strengthened the dominant role of market in the economy, which indicates the market-oriented social credit relationship would fully influence the U.S. economic and social development. The status of credit relationships in the United States restricts the country’s creative capability of actual value by affecting its economic structure. The heavy debt burden which exceeds the real debt repayment capability forces the state apparatus to satisfy the country’s capital demand in the manner of surpassing the speed of value creation by the real economy. The over-expansion of virtual economy is the result of the paradoxical movement of the credit relationship in the United States. Thus, Dagong believes that as long as the policy of credit expansion remains intact in United States, the development model of financialization of the national economy would not be changed and the key factors to induce long term economic recession would continue to play a role.

Second, the economic financilization and industrial hollowing-out in the United States has broken the normal relationship between the financial system and real economy, leading to the pursuit of the virtual wealth. As social capital was largely sucked into the financial system, the value of a huge amount of financial assets operating away from the underlying assets and basic economy is amplified in a surprising manner, making people more concerned about the increase in virtual wealth and less interested in creating real wealth; and a large number of entities were transferred overseas, resulting in a serious industrial hallowing-out, thus the country’s creative capability of actual wealth has been severely weakened. In addition, as the government has long relied on borrowing to carry out its administrative functions, it would gradually lose the autonomy to manage the economy though effective exploration of fiscal policy, and finally has to resort to the banknote printing machine, like killing the goose that lays the golden eggs. The improvement in the creative capability of actual wealth depends on the reasonable positioning of the financial system and real economy, and the adjustment process will determine the U.S. economic recovery and vision for future development.

Third, the U.S. global hegemonic strategy has consumed enormous national financial resources, but its own capacity of wealth production is insufficient to support its huge strategic target. The dependence on issuing national debt or U.S. dollars to carry out its strategy not only lacks sustainability, but also becomes the root of yielding fiscal deficit. A balance of state revenue and expenditures is advantageous to the sustained development of the U.S. economy. However, it is almost impossible for the U.S. government to abandon its global strategy. Hence, it will become a long-term factor to hinder the U.S. economy.

Fourth, long-term dependence on the U.S. dollar depreciation to export debt is not only harmful to the creditor’s interests, but is also unable to solve its debt dilemma. The problem of the national development strategy is that it causes the U.S. government to bear a huge debt burden; however the U.S. government is unwilling to adjust its strategy to reduce debt; rather, it believes that exporting debt through the U.S. dollar depreciation is more compliant with the interests of the United States. Although the U.S. dollar depreciation forces creditors to transfer their interests to the US, it will reduce the market confidence in U.S. dollars, which may trigger the trend of selling U.S. dollars. Hence, it will change the international currency system pattern, and the U.S. dollar hegemonic status will be shaken inevitably, which will ultimately affect the backflow of U.S. dollars, hindering the international financing channel of the U.S. government directly, and reducing its debt income. The debt income concerns the prosperity of the United States. To avoid the outbreak of debt crisis, it has to issue additional currency to solve the problem of insufficient debt income. Hence, the U.S. dollar starts a new round of depreciation, circulating on and on, which intensifies the risk of debt repayment inevitably.

Fifth, the reform of financial and rating systems has failed to fully reflect the essential requirements of the credit economy, and it is difficult to establish a basic service system of national economy that accommodates the development law of a credit economy, so as to push the U.S. economy into a path of revival. "Financial Regulatory Reform Act" is the main measure of the U.S. government to prevent further crisis, but its content shows that they have not really found the root of the problems within the U.S. financial system. The root cause of credit crisis can not be eradicated by simply resting on regulatory reforms.

The U.S. financial system has created a myriad of financial products, which attract the continuous influx of global USD capital. Foreign capitals make up the most important part of the U.S. economic ecosystem, and it is the driving force of this very system to obtain capital revenue through credit expansion, but the consequent problems are serious:

(1) social capitals are encouraged to engage in financial speculations, and the pursuit of virtual wealth rather than material wealth is not conducive for the United States to enhance its capacity of value creation; (2) credit activities have deviated from the proper role of supporting the development of real economy, the social credit demand is mainly determined by the market, and the extra credit created by the market becomes hot money that jeopardizes the country’s economic development. Furthermore, the government’s ability to regulate social credit is largely impaired by financial innovation products; (3) the financial system is composed of complicated credit relationships, which exacerbates the asymmetry of credit risk information and augments the probability of systemic risks.

The development of credit socialization should not suggest any change in the orientation of financial services. The essence of finance lies in the credit relations between the creditors and debtors. This relationship constitutes the whole of the social credit system, providing a system for distribution of funds for the real economy to create social wealth. As a result of the pursuit of value adding by means of credit innovation, the scale of social credit in the United States is in wild expansion, so that the threat of systemic credit risk becomes a constant phenomenon. With the continued depreciation of U.S. dollar, once its dominant position around the world is severely challenged, the financial system that relies heavily on the strong dollar will no longer support the national economy to operate in the current model. In this context the government will have to rebuild the national economic system, the social cost of which will be enormous. The U.S. government failed to make a master plan for the reform of the financial system from a strategic level, and the principles as well as the approach of the reform are ambiguous.

The ongoing reform aimed at practical interests is one that addresses the symptoms not the cause. Such a reform can not adapt to the historical requirement necessary for the recovery of the U.S. economy and improving the U.S. economic system. The crisis triggered by the failure of its credit rating system has almost destroyed the U.S. financial system. However the current reform measures do not address the fundamental problems and the U.S. rating system, tested by the financial crisis, is going to lose a historical opportunity of recovery. The main problem in the U.S. credit rating system is it treats the CRAs as general players in the market and does not encourage competition amongst them, and such a mechanism cannot ensure the CRAs will fulfill their public responsibilities. The U.S. credit rating systems lack of institutional guarantees to reveal credit risk cannot provide reliable credit risk information to the public and it is falling behind the development of the credit system. Therefore, to a certain extent, the credit system cannot provide effective funding to support the economic recovery and development.

Dagong believes that the deep-rooted reason for the credit crisis that happened in the United States is that the current model of economic development and management has deviated from the laws of credit economic development. Radically, it is the problem in the idea of governing the country and national strategy. The fact that the traditional way did not save the United States economy further proves that the U.S. government lacks the capability to rule the country by following the law of credit economy. The economic recovery in the U.S. depends on the change in the way of thinking of its government; however such a change is very difficult to realize whether the Republican or Democratic Party is in power. Therefore, the U.S. government will follow its lingering notion, consequently the economic recovery will last a long time and the government’s debt repayment capability will deteriorate even further.

II. Subject to the economic development model of the United States, the credit crisis is far from over, and the U.S. economy will be in a long-term recession.

The key economic data of the United States in three consecutive years since the financial crisis indicates a declining or slight recovery trend in GDP, the size of the banking industry and fiscal revenue, money supply, unemployment rate, fiscal deficit and the outstanding government debt remain at a high level. Adopting the extreme measure of continuous issuance of currency in the context of unconventional use of monetary and fiscal policies to save its economy indicates that the credit crisis in the U.S. financial field is evolving into a national crisis. The root cause is that something is wrong with the economic development model adopted by the United States. The consequent imbalance in the national economic structure requires the government to adjust its economic strategy in order to realize a new balance and create a new economic architecture for economic recovery. Therefore, Dagong analyzes and judges the prospects of the U.S. economy from the following aspects:

First, the motivational force of the U.S. economic growth is credit expansion and at present the huge debt is the result of long-term accumulation of credit expansion. Gone are the basic conditions that the economic recovery is realized through repeated use of credit expansion. Therefore, it is impossible for the U.S. economy to generate a driving force for healthy development unless it can return to the real economy and discover new areas of value creation. As of the end of 2009, the total debt, including that of the U.S. government, enterprises and household, amounted to 52.3 trillion U.S. dollars, while the GDP was just 14.3 trillion U.S. dollars in the same period. Without a massive increase in the real value of domestic production, it is impossible for the United States to acquire the capability of paying off its stock debt by relying solely on its current capability of value creation. Therefore, the U.S. economy would be bound to sink even deeper into the mire if it continues to rely on the credit expansion model of economic development.

Second, the U.S. capability of creating real wealth can not support its huge consumption. Under the current circumstance it is difficult to increase the speed of wealth growth; the only correct way out of debt reduction is mitigation of expenditure. Since the U.S. government will not adjust its national strategy, it is inevitable for the United States to increase debt or transfer debt by depreciating the U.S. dollar. The inevitability of such a move makes the dominant factor in the lasting stagnancy of the U.S. economy. In the components of the U.S. GDP in 2009, the financial services sector accounted for 21.4% while the real economy sector accounted for 65%.The total output value of the U.S. financial services industry is composed of two major parts: one is the transferred production value, most of which comes from value distribution of participating in international production. Another part is the inflated value originated from credit innovation, which belongs to bubble value. In addition, due to the high economic financialization, more than half of the profits in the real economy come from the returns of financial activities. If we exclude the factor of virtual economy, the U.S. actual GDP is about 5 trillion U.S. dollars in 2009, per capita GDP about $ 15,000. Meanwhile, the total domestic consumption was 10.0 trillion U.S. dollars and government expenditure was 4.5 trillion U.S. dollars. The production capacity of real value in the national economy is the material base to arrange social distribution and consumption. As the U.S. government arranges its budget according to the GDP including the virtual value, its revenue must fall short of its expenditure, so the socialization and normalization of debts will exacerbate the environment of economic development. It is predicted that the average real GDP per year of the United States will not reach 6 trillion U.S. dollar and per capita GDP will be less than 20,000 in the coming 3-5 years.

Third, the international division of labor and the import and export policies will make it difficult for the United States to realize balance of international payment. Based on the U.S. industrial structure, exports are mainly comprised of high-tech products, but the U.S. limits the export of technical products for strategic reasons; however, what the U.S. needs the most are daily necessities and energy, etc. In this case, imports are rigid, while exports are elastic. On the one hand, American products are not essential items for many countries; on the other hand, due to the policy restraint, it is difficult to effectively raise the export volume, all of these causes the U.S. to have long-term structural trade deficit. Ever since 1983, the current account deficit of the United States has been increasing by an average of 20% year on year. Even if considering the stimulation effect of U.S. dollar depreciation to export, the current account deficit is expected to maintain 4% of GDP for the next 3-5 years. The U.S. dollars outflow through current account deficit flows back to the United States through the capital account and financial projects, which supports its financial system to realize the transfer of international production value to the U.S. The U.S. imbalance of trade becomes an international wealth plundering system by exchanging domestic necessities with the export of the U.S. dollars. It is the barometer to measure whether the U.S. has the creative capability of actual value.

Fourth, it is difficult for the renewable energy development strategy to become the new focus of economic growth. The renewable energy development strategy proposed by the Obama administration is beneficial to inspiring people’s confidence in economic recovery, but it is still impossible to become an effective power to reverse the American economic development situation in a moderately long time, because the U.S. lacks the strategic investment capability that would make renewable energy an industry to transform the national economy. In addition, it is confronted with the formidable competition from Northern Europe in terms of the new energy technologies. Therefore, this strategy will exert very weak influence on changing the American economic structure and development model within a long period of time.

In general, it is difficult for the current economic structure used in U.S. economic development model to create sufficient material base to support its domestic consumption. Virtual economy gives tremendous impact on the safety of the national economic system.

The reform of the development model of the national economy forms the decisive factor to stop the economic recession and to realize the sustained development of the national economy in the post-crisis era.

III. Continuous economic downturn leads to increasing risks in the financial system and the trend of the U.S. dollar depreciation will cripple the value transfer capability of the financial system to attract dollar capital reflow.

After the crisis, the stability of the American financial system has not improved fundamentally; rather, it will face increasingly more serious rising trend of risks. After the financial crisis broke out in 2008, the large scale bailout program of the Federal Reserve and the U.S. government temporarily stabilized the financial system; the too-big-to-fail financial institutions benefited a lot. However, there are still toxic assets such as the huge financial derivatives hidden in the financial system waiting for effective disposal, and the future deleveraging process will take time. In addition, the long term high unemployment rate caused a rise in loan defaults. By the end of Q2 2010, the default rate of bank loans in the United States has achieved 7.32%, increasing for 17 consecutive quarters, in which the default rate in the housing loans has increased to 11.4%. Since the government withdrew the housing stimulus measures in April 2010, the real estate market has been in recession and the problem of foreclosure tends to become serious. It is estimated that the banks will face the repurchase pressure of nearly 220 billion U.S. dollars worth of real estate mortgage bond, which cannot be satisfied by the current provision for repurchase.

On the basis of 140 cases of bank failure in 2009, another 86 banks went bankrupt in the first half of 2010 and the current number of troubled banks has reached nearly 500. The end of 2010 is likely to witness a new rise in bankruptcy for small and medium-sized banks in the U.S.

The U.S. monetary policy used in dealing with the crisis has almost lost its effect in promoting economic growth. As a new economic driving force has not formed in the United States, the declining intention of individual consumption and corporate investment leads to the shrinking of monetary demand. Although the continuous loose monetary policy of the Federal Reserve has largely increased the basic monetary supply, it has failed to promote the expansion of domestic credit scale. The insufficient credit demand of real economy combined with the bank’s mood of reluctant lending during the period of economic downturn due to asymmetry of credit risk information, has resulted in the decreasing credit scale in the United States. Following the 10.3% decline in the amount of commercial bank credit and leasing in 2009, another 7.2% decline happened in the first three quarters in 2010 on a year-on -year basis. The large amount of liquidity accumulated within the financial system is mainly used for speculative financial transactions and flowing into foreign markets, which is neither conducive to promoting the development of real economy nor helpful for improving the chronic overexpansion of virtual economy.

The Federal Reserve’s monetary policy of continuous quantitative easing has temporarily reduced the long-term debt interest rate, but the consequent dollar depreciation trend will trigger the financial system’s long-term recession. The monetary policy of a new round of quantitative easing launched by the Federal Reserve on November 3, 2010 plans to release another 600 billion U.S. dollars of long-term U.S. treasury bond by the end of June next year. The direct objective of this policy is tomaintain the current low yield of the Treasury. The continuous U.S. economic downturnand the government’s increasing debt burden have undermined the foreign investors’ confidence in the Treasury. These investors turn to buy gold to avoid risk, which pushesup the price of gold and increases the pressure of a rise in long-term interest rate.

Especially for a highly-indebted economy as the United States, a large amount of financial derivative contracts in the financial system is related with the interest rate; the increase of long-term interest rates will cause another big fluctuation in the financial system, restrict the economic recovery, and increase the government’s burden of debt service. The Federal Reserve’s monetary policy can temporarily decrease the long-term interest rate, but it can also trigger the dollar’s depreciation and reduce the attraction of dollar-denominated assets to foreign investors. From June, 2010 until now, the U.S. dollar index has dropped about 6% and has depreciated 15% relative to the Euro, 11% relative to the Sterling Pound, 13% relative to the Yen, 18.5% relative to the Australian dollar, 11.4% relative to the Korean Won. The dollar’s continuous depreciation will cripple the value transfer capability of the U.S. financial system to attract the dollar capital to reflow, and the status of the U.S. as the global financial center is on the decline. Therefore, the room for implementing of monetary policy in the United States is increasingly being squeezed. On the one hand, the long-standing quantitative easing policy will only play a temporary role in decreasing interest rate, as a consequence the dollar depreciation is not conducive to the financing requirement of the United States as the largest debtor country and the interest assertion of the creditor will be the potential pressure to the increasing interest rate. On the other hand, the long-term economic downtown makes it impossible for the government to increase interest rate and regain a strong dollar policy. In this dilemma, any policies chosen by the Federal Reserve will hurt itself. Though it is likely for the current loose monetary policy to postpone the occurrence of the difficulties, yet in the long run, it will be proven to be a practice resembling drinking poison to quench thirst.

IV. New round of liquidity injection can not substantially reverse the trend of increasing the federal government’s fiscal deficit and debt burden in the long term.

The U.S. Monetary Authority launched the monetary policy of a new round of quantitative easing, announcing the release of a large amount of federal government Treasury bond continuously. However, it only has a limited positive influence for easing the current embarrassed fiscal conditions of the federal government. In 2009, the U.S. increased another 1 trillion U.S. dollars fiscal deficit in response to the financial crisis, making the ratio of year-end fiscal deficit to GDP a record 10.6%, and consequently led to more difficult fiscal operation for the government. Under these circumstances, the Federal Reserve took the measure of direct debt monetization, on the one hand, financing for the federal government’s fiscal deficit, and on the other hand, keeping the U.S. Treasury interest rate at a low level. The federal government’s financing cost and interest burden, therefore, are both controlled at relatively favorable levels.

Additionally, further depreciation of the U.S. dollar is inevitable due to the liquidity increased by the monetary policy of a new round of quantitative easing, and the U.S. government’s current debt burden, to some extent, is expected to be released. By the end of 2009, the balance of the U.S. government’s outstanding debts reached 12.3 trillion U.S. dollars, of which over 7.8 trillion U.S. dollars debts were held by the public including foreign investors. This is to say, if the U.S. dollar depreciates by 1%, the actual decrease of government’s debt burden will exceed 123 billion U.S. dollars, about 5.5% of its fiscal revenue in 2009. The U.S. base currency will be supplied with an increase of 30% on the existing basis in the coming eight months, therefore, in full consideration of such factors as economic recession and slowdown of currency circulation caused by shrinkage of private credit, a conservative estimate would be U.S. domestic inflation increase of about 1.5 percentage points and U.S. exchange rate index down approximately 10% before Q2 2011. As a result, federal debts will actually be reduced by over 250 billion U.S. dollars.

Public creditors’ interests are invisibly eroded due to the depreciation of U.S. dollar; especially the foreign creditors will suffer even greater losses from fluctuation of U.S. dollar exchange rate. Although the federal government could ease its actual debt burden to some extent via this channel, its sovereign credit will be adversely affected as it ignores the responsibilities of credit contracts and the legitimate rights and interests of creditors.

For a long time, the U.S. authority has not been temperate in its government credit expansion, resulting in large fiscal deficit and increasingly high government debts in consecutive years. Under current governance framework in the U.S., rigid expenditure accounted for a larger proportion of the fiscal expenditure to satisfy its global hegemonic strategy, which, on one side, increased the difficulty for the U.S. federal government to optimize its fiscal expenditure structure and control deficit growth, while, on the other side, made the federal government unable to have sufficient operating space in smoothing economic periodic fluctuation by fiscal policy instruments so that sustainable and steady economic growth cannot be guaranteed. After the breakout of the global financial crisis, the weak economic growth in the U.S., increase of the fiscal expenditure and the launch of the monetary policy of a new round of quantitative easing will all drive the U.S. debt burden to increase further. The pattern that the U.S. government has of a high fiscal deficit and heavy debt burden is essentially because of its terribly-flawed development model of debt economy, which can not be significantly improved by simply increasing channels for issuance of the U.S. dollar. Dagong predicts that the U.S. fiscal deficit will remain moderately high in 2010 and 2011, about 10.8% and 8% of the year’s GDP respectively. The federal debts will also increase in 2010 and 2011 on the basis of 2009, and the ratio to the year’s GDP will be as high as 95% and 97% respectively.

V. In essence the depreciation of the U.S. dollar adopted by the U.S. government indicates that its solvency is on the brink of collapse, therefore it wants to cut its debt through the act of devaluation with the national will; such a move has severely harmed the interests of creditors. The whole world, consequently, will have to face a period of dramatic adjustment of interest pattern.

The status of the U.S. dollar as the dominant international reserve currency determines that its depreciation gives an inevitable impact to the interests of all creditors.

In addition to the shrinking of creditors’ assets, the utter chaos in the international currency system triggered by the depreciation of the U.S. dollar will definitely damage the interests of all the creditors in the world at various levels. Together with the possibility of inflation in the future, the wealth of creditors will be plundered once again by the malicious act of currency devaluation conducted by the U.S. government after it suffered the losses during the financial crisis since 2007.

The value fluctuation of the world’s major currencies caused by the continuous devaluation of the U.S. dollar will push the adjustment in world interest pattern through the value comparison of the monetary system. The essence is to transfer the interests of the creditors to the debtor free of charge, and that will fundamentally destroy the international credit system and global economic system comprised of the creditor system and debtor system, resulting in an overall crisis around the world.

Outlook

Dagong believes that the occurrence and development process of the credit crisis in the U.S. resulted from the long-standing accumulation of the contradictions in its economic system; the U.S. debt burden can be relieved only to a certain extent through large-scale printing and issuance of the U.S. dollar; however the consequent decline of the U.S. dollar status and national credit will block the debt revenue channel which is vital to the existence of the United States to a greater extent. The potential overall crisis in the world resulting from the U.S. dollar depreciation will increase the uncertainty of the U.S. economic recovery. Under the circumstances that none of the economic factors influencing the U.S. economy has turned better explicitly it is possible that the U.S. will continue to expand the use of its loose monetary policy, damaging the interests the creditors. Therefore, given the current situation, the United States may face much unpredictable risks in solvency in the coming one to two years. Accordingly, Dagong assigns negative outlook on both local and foreign currency sovereign credit ratings of the United States.

India's railway plan: Loud Thunder, little rain again

Last time, I wrote about India's insufficient action to fulfil its ambitious plan for adding power generation capacity. The same story is happening in India's railway system without any exception.

BTW, new data released by India government shows that India added only 9585 mw of new power capacity in 2009-2010 fisical year (india's fisical year ends in March), against the overall target of 14,507 MW.

The achievement during 2008-09 was 31 per cent (3,454 MW against a target of 11,061 MW) and 57 per cent in 2007-08 (9,263 MW against a target of 16,335 MW).(Source)

You cannot imagine that a country of 1.1 billion population could only build 513 km of new railways in 2 years, but its leaders are still shamelessly talking about improving infrastructure quickly and bragging that India is catching up with China.

For a convenient comparison, China built more than 30,000km of new railways in the 30 years before the reform. That means China built more than 1,000 km of new line each year 30 years ago.

In 2009 alone, China constructed new railroad lines of 5,461km, 4,063km of new double lines. Total of 5,557 km of new lines were put into operation, including 2,319 km of new high-speed lines. 8,849 km railways were electrified in 2009 alone. (Source)

The following reports came from here.

Indian Railways could achieve only 28 per cent of the total 11th Five-Year Plan (2007-12) targets in the first two years.

"Performance of the Railways, in the first two years of the plan period, was much below the proportionate targets as it could achieve only 28 per cent of total plan size," according to the latest report of the Comptroller and Auditor General of India.

It was planned to add 2,000 kms of new lines, convert 10,000 km of metre/narrow gauge into broad gauge, double the 6,000 km of single track and electrify 3,500 km of routes during the 11th Plan.

However, in the first two years of the plan period, 513 km (25.65 per cent) of new lines, 2,612 km (26.12 per cent) of gauge conversion, 789 kms (13.15 per cent) of doubling and 1,299 km (37.11 per cent) of electrification was completed.

The report revealed that out of 144 ongoing railway projects, six projects have been delayed by over 10 years.

The anticipated cost of completion of these projects has been revised to Rs 13,055.47 crore (Rs 130.55 billion) from original cost of 3,463.60 crore (Rs 34.63 billion).

The 11th Plan size of Rs 2,33,289 crore (Rs 2,332.89 billion) envisages financing of Rs 63,635 crore (Rs 636.35 billion) through general budgetary support, Rs 90,000 crore (Rs 900 billion) through internal resources and Rs 79,654 crore (Rs 796.54 billion) through extra budgetary resources.

Human rights? 1140 people were killed by Indian railway in 15 months in Chennai ONLY

The list of people run over by trains in Chennai had crossed 1140 in the last 15 months.

According to official data, more than 275 people were killed on Chennai Beach-Mount section, the highest in EMU sector, followed by 204 accidents between Pazhavanthangal and Maraimalai Nagar, falling under Tambaram Railway Police Station during the period of January 2009 and March 2010.


Source.

Superpower? 300m Indians go hungry everyday! Worse than Zimbabwe

According to the Global Hunger Index, India ranks 65th out of 88 countries, with a hunger rate of 23.9.

India, which was largely unaffected by the recent global economic slowdown, however, appears to have made little progress in tackling hunger and malnutrition. The situation remains 'alarming' in the country on this front.

Countries like Uganda (38th); Mauritania (40th); Zimbabwe (58th) and many others have a better record than India on this front. Even war-torn nations have managed to combat the scourge of hunger quite well, while India -- even though it boasts of being the second fastest growing economy in the world -- languishes far behind and millions in the country go hungry.

21 per cent of the Indian population was undernourished (between 2003 and 2005), 43.5per cent Indian children under the age of five were underweight (between 2002 and 2007) and the under five-years age infant mortality rate in 2007 was 7.2 per cent.

In September 2009, Prime Minister Manmohan Singh projected a food stock of 50 million tonne. Yet, close to 300 million Indians go without food every day!

According to the World Bank, 46 per cent of Indian children below the age of five are underweight, and the World Food Program says that close to 30 per cent of the world's hungry live in India.

According to the 2008 Global Hunger Index, which is calculated by the International Food Policy Research Institute, India has close to 350 million people who are food insecure -- in other words, who are not sure where their next meal will come from.

To put that into context, that is the same as the entire populations of Germany, France and the United Kingdom all going hungry.


Source

The Number of China's Patent Filings was More Than 10 Times of India's

THE number of applications for international patents fell by 4.5% in 2009 compared with the year before to 159,000 as companies in Western countries cut back on R&D spending during the recession. Yet applications from east Asian economies, including Japan and South Korea, increased slightly, while those from China soared by 30%. Since 2005 applications from China have grown by 210% as the country has developed a home-grown high-tech sector. Source




International patent filings experienced a sharper than average decline in a number of industrialized countries. For example, the filing rate dropped by 11.4% in the USA and by 11.2% in Germany in 2009.

Declines were also experienced in the United Kingdom (-3.5%), Switzerland (-1.6%), Sweden (-11.3%), Italy (-5.8%), Canada (-11.7%), Finland (-2.2%), Australia (-7.5%) and Israel (-17.2%).

The United States of America (USA) maintained its top ranking (annex 2), filing just under a third of all international applications in 2009 (45,790), followed by Japan (+3.6%, 29,827 applications), Germany (-11.2% or 16,736 applications), ROK (+2.1%, 8,066 applications), China (29.7%, 7,946 applications), France (+1.6%, 7166 applications), United Kingdom (-3.5% or 5,320 applications), the Netherlands (+3.0% or 4,471 applications), Switzerland (-1.6% or 3,688 applications) and Sweden (-11.3% or 3,667 applications).

Panasonic Corporation (Japan) returned to the top spot in the list of PCT applicants, nudging Huawei Technologies, Co., Ltd. (China) into second place. Panasonic Corporation had 1,891 PCT applications published in 2009, China's Huawei Technologies Co. Ltd. had 1,847, followed by Robert Bosch GMBH (Germany, 1586 applications), Koninklijke Philips Electronics N.V. (Netherlands, 1,295 applications) and Qualcomm Incorporated (USA, 1280 applications). Four Japanese companies, Panasonic Corporation (ranked 1st), NEC Corporation (ranked 8th), Toyota Jidosha Kabushiki Kaisha (ranked 9th) and Sharp Kabushiki Kaisha (ranked 10th) featured in the list of top 10 largest filers.

The University of California accounted for the largest number of applications published in the category of educational institutions. Most top-filing universities, however, experienced declines in the number of international patent filings in 2009.

The largest number of international applications received from developing countries in 2009 came from the Republic of Korea (8,066) and China (7,946) followed by India (761), Singapore (594), Brazil (480), South Africa (389), Turkey (371), Malaysia, (218), Mexico (185) and Barbados (96).

Developing countries make up over 78% of the membership of the PCT, representing 112 of the 142 countries that have signed up to the treaty and accounted for 14% of the total number of filings (with China and ROK accounting for 10%). Source

Patent filing with patent offices in their own countries

The above data came from WIPO. There are also big difference between the patent filings inside China and India. The latest data was for 2007 but it was published in 2008.

According to global research and analytics firm Evalueserve, India filed 35,000 patent applications during the fiscal year 2007-08, whereas China had more than 2.45 lakh applications in 2007.

In 2007, filings by domestic applicants in China accounted for 62.4 percent of the 20-year patent applications with the S.I.P.O.

During the same period, the year-on-year increase in domestic 20-year patent application filing in China was at 25 percent, whereas that of foreign filings stood at 4.5 percent.

On the other hand, only 24,505 patent applications were filed at the I.P.O. in 2005–06. Among them, domestic applicants filed about only 20 percent (4,855 applications) while foreign applicants filed 80 percent (19,650 applications). (Source)


Conclusion


When Indian and western media often tag Indian economy as knowledge-based economy while tell the world that China is only a copycat. But China's filed 7,946 patent application in 2009, and India only did 761 in the same year. The number of China's patent filling was than 10 times of India's while China's economy was about 4 times of India's (US$ 4.9 trillion VS US$1.28 trillion).

The trend difference of patent application in the two countries are obvious. From year 2004 to 2009, The numbers of India's patent filings were: 724, 679, 836, 901
1070, 761. During the same period, the numbers of China's patent filings were: 1706, 2512, 3937, 5465, 6128,7946. This is a great leap forward. Source and source.

Comparing with China's achievement, India's so-called knowledge-based economy is simply another joke for the world.




India was even not in Top 15 countries by the number of patent filling in 2009

India has a huge market? Don't Fool the World

Indians are always bragging that India is a comsumer market and has huge middle class ( some even put the number of middle class in India as ridiculous 300 million).

Sales of some brands in India in 2009

For the 12-month period ended December, 2009, BMW sold 3,619 luxury cars in India, as compared to the 3,247 luxury units that Mercedes Benz sold.

Mercedes ended 2009 with 38% of the pie against BMW's 40% with the third German luxury carmaker Audi claiming the rest. From the calculation, Audi only sold about 2000 cars in India. Source

In 2009, Volvo only sold a pitiful 140 cars in India. (Source).

Sales of same brands in China in 2009

For those who don't know how small India's market size is, I give you some more data on the sales of the same brands in the same year (2009) in China. You can find the clue by doing simple comparison. Basically, tiny Indian market can be ignored.

Mercedes-Benz sold a record 68,500 cars in China last year, it said in a statement late on Monday, beating its previous target of 65,000 units.

Sales of Volkswagen AG's Audi premier brand rose 32.9 percent to 158,941 units. Source

BMW's deliveries in 2009 climbed 38 percent in China to 90,500 vehicles and 24 percent in India to 3,600. Source

According to the Volvo's news release, the company sold 22,405 cars in China in 2009. (Source)

The size of whole auto market in 2009

As auto market in whole, China became the largest auto market in the world. In 2009 passenger car sales soared to 10.3 million in China and total vehicle sales are estimated at 13.6 million, the China Passenger Car Association said. That represents growth of about 45 percent from 2008.

By contrast, U.S. sales of cars and light trucks plunged 21 percent in 2009 to 10.4 million as a shaky economy kept buyers away from showrooms. It was the first time any country bought more cars than Americans. (Source)

Only 1.4 million cars were sold in Inddia in 2009 according to a Bloomberg News calculation of data released by the Society of Indian Automobile Manufacturers on Jan. 8 2009. (Source). That number is really pityful and embarrassing for a country of 1.1 billion population.

Indian Economy Is In Trouble

India's industry, Infrastructure growth nosedives

Amidst crisis in the global financial markets, India on Friday reported a sharp drop in industrial growth to 1.3 per cent in August from a high of 10.9 a year-ago.

The manufacturing sector put out a dismal performance growing by a mere 1.1 per cent as against 10.7 per cent in the same period a year ago.

The growth in key infrastructure industries too dipped to 2.3 per cent in August 2008, compared with 9.5 per cent in the same period last year.

The cement sector declined to 1.9 per cent against 16.7 per cent in August 2007, while coal output dropped to 5.9 per cent compared with 8 per cent in the corresponding year.

Finished (carbon) steel growth also declined to 4.4 per cent in August, from 9.6 per cent in the same month last year.

For the April-August period of 2008-09, crude oil production registered a negative growth of 0.9 per cent, against one per cent during the same period last year, while petroleum refinery products dropped to 4.8 per cent from a healthy 10.4 per cent in the same period last year.

Source.

Weakening currency

The weak currency ended Oct. 8 at 48 rupees to the dollar, its lowest level in 5½ years. The rupee has taken a 21% dive since January.

Source

The currency reached a record low of 49.26 per dollar in intraday trading on Fridaqy (10-10-2008).

Source.

Stock market is in nerve

On Friday, Except Ranbaxy Laboratories and State Bank of India, all the other 28 stocks in the Sensex basket ended lower. Among the major losers, Reliance Communications crashed 21.02% at Rs237.40, ICICI Bank plunged 19.71% at Rs364.10, Reliance Infrastructure slumped 19.26% at Rs515.30 and JP Associates crumbled 16.27% at Rs76.15. Tata Steel plummeted 14.99% at Rs287.50, Hindalco Industries dropped 11.18% at Rs80.65, HDFC shed 8.98% at Rs1719.20, DLF tanked 8.79% at Rs281.65, BHEL declined 8.28% at Rs1,345.85 and Larsen & Toubro lost 8.02% at Rs889.15. Other heavyweights also came under sustained selling pressure and lost around 5-7% each.

Realty stocks were battered the worst. Orbit Corporation tanked nearly 19.45% at Rs87.50, IndiaBulls Real Estate plummeted 19.45% at Rs95.45, Mahindra Lifespace Developers slumped 17.49% at Rs211.55, Peninsula Land dropped 16.05% at Rs28.25, Anant Raj Industries lost 15.07% at Rs80 and Unitech slipped by 12.38% at Rs82.80. Akruti City, Omaxe, Parsvnath Developers and Phoenix Mills declined over 1-8% each.

Source.

India's Economy Hits the Wall

Growth is slipping, stocks are down 40%, and foreign stock market investors are fleeing. Businessmen blame the ruling coalition for failing to make reforms.

Just six months ago, India was looking good. Annual growth was 9%, corporate profits were surging 20%, the stock market had risen 50% in 2007, consumer demand was huge, local companies were making ambitious international acquisitions, and foreign investment was growing. Nothing, it seemed, could stop the forward march of this Asian nation.

But stop it has. In the past month, India has joined the list of the wounded. The country is reeling from 11.4% inflation, large government deficits, and rising interest rates. Foreign investment is fleeing, the rupee is falling, and the stock market is down over 40% from the year's highs. Most economic forecasts expect growth to slow to 7%—a big drop for a country that needs to accelerate growth, not reduce it. "India has gone from hero to zero in six months," says Andrew Holland, head of proprietary trading at Merrill Lynch India (MER) in Mumbai. Many in India worry that the country's hard-earned investment-grade rating will soon be lost and that the gilded growth story has come to an end.

Global circumstances—soaring oil prices and the subprime crisis that dried up the flow of foreign funds—are certainly to blame. But so is New Delhi. Much of the crisis India faces today could have been avoided by skillful planning. India imports 75% of its oil to meet demand, which have grown exponentially as its economy expands. The government also subsidizes 60% of the price of such fuels as diesel. In 2007, when inflation was a low 3%, economists such as Standard & Poor's Subir Gokarn urged New Delhi to start cutting subsidies. Instead, the populist ruling Congress government spent $25 billion on waiving loans made to farmers and hiking bureaucrats' salaries.

Botched Opportunities
Now those expenditures, plus an additional $25 billion on upcoming fertilizer subsidies, is adding $100 billion a year—or 10% of India's gross domestic product, or equivalent to the country's entire collection of income taxes—to the national bill. This at a time when India needs urgently to spend $500 billion on new infrastructure and more on upgrading education and health-care facilities. The government's official debt, which dropped below 6% of gross domestic product last year, will now be closer to 10% this year. "Starting last year, the government missed key opportunities" to fix the economy, says Gokarn. In fact, he adds, "there has been no significant reform done at all in the past four years"—the time the Congress coalition has been in power.

Even the most bullish on India are hard-pressed to recall any significant economic reforms made in the recent past. A plan to build 30 Special Economic Zones is virtually suspended because New Delhi has not sorted out how to acquire the necessary land, a major issue in both urban and rural India, without a major social and political upheaval. Agriculture, distorted by fertilizer subsidies and technologically laggard, is woefully unproductive. Simple and nonpolitical reforms, like strengthening the legal system and adding more judges to the courtrooms, have been ignored.

A June 16 report by Goldman Sachs' (GS) Jim O'Neill and Tushar Poddar, Ten Things for India to Achieve Its 2050 Potential, is a grim reminder that India has fallen to the bottom of the four BRIC nations (Brazil, Russia, India, and China) in its growth scores, due largely to government inertia. The report states that India's rice yields are a third those of China and half of Vietnam's. While 60% of the country's labor force is employed in agriculture, farming contributes less than 1% to overall growth. The report urges India to improve governance, raise educational achievement, and control inflation. It also advises reining in profligate expenditures, liberalizing its financial markets, increasing agricultural productivity, and improving infrastructure, the environment, and energy use. "The will to implement all these needs leadership," points out Poddar. "We have a government in New Delhi with the best brains, the dream team," he says, referring to Oxford-educated Prime Minister Manmohan Singh and Harvard-educated Finance Minister P. Chidambaram. "If they don't deliver, then what?"

Disillusioned Business
More worried than most are India's businessmen, who have turned in stellar performances with their investment and entrepreneurial drive and begun to look like multinational players. For them, there's plenty at stake. But lack of infrastructure, from new ports to roads, along with an undeveloped corporate bond market and high prices for real estate, commodities, and talent, are causing them to hit "choke points and structural impediments all over. We will lose years," says Bombay investor Chetan Parikh of of Jeetay Investments.

Sanjay Kirloskar, chief executive of Kirloskar Brothers (KRBR.BO), a premier $470 million maker of water pumps, already has $100 million in overseas contracts. Yet few infrastructure contracts have come from New Delhi. Kirloskar had hoped to be part of a grand project linking India's rivers, but those plans have been on hold for four years. "The infrastructure growth we had hoped for has not come about," he says. "Instead, we will now expand overseas more than in India."

Such constraints on growth at home will have an impact. Corporate earnings growth is likely to dip, says Merrill Lynch's Holland, who now predicts just 10% growth, instead of the previous year's 20%. That slowdown makes it less attractive for foreigners to invest in India's stock market. Already this year, foreigners have taken $5.5 billion out of the market, compared with the $19 billion they invested last year. Gagan Banga, chief executive of India Bulls Financial Services, an emerging finance and real estate giant, points admiringly to China's ability to maintain its growth momentum for a decade, while India's has not been able to hold up for even three years. "Serious companies are going to grow at a much slower pace, and some may even de-grow this year," he says. Unless major policy decisions are made by New Delhi immediately to keep the economy on the growth path, he says, "India will slow down even further."

New Delhi defends its four year reign in India. "We've had 9% growth for four years in a row," says Sanjaya Baru, media adviser to Prime Minister Singh. "That is unprecedented." He attributes it to the increasing rate of investment, up from 28% of GDP to 35% currently, "close to most ASEAN economies," though he admits that a large part is from the private sector. "Yes, there is a fiscal problem, but there's a price to be paid for coalition politics," adds Baru. So having growth drop "from 9% to 7% is not grim."

Social Backlash?
Chetan Modi, head of Moody's India, says the increasingly high cost of doing business in India may force global investors who had set up base in India—especially financial-services players—to move to more affordable and efficient hubs, such as Singapore and Hong Kong. If the economy slows and inflation continues to accelerate, says Sherman Chan, economist at Moody's Economy.com, "social unrest is possible."

In fact, India is becoming a dangerous social cauldron. The wealth harvested by the reforms of previous governments has made itself evident in the luxury cars and apartments in India's big cities, leaving much of India full of aspirations but few means to achieve them. There is a severe shortage of colleges, yet a plan to build 1,500 universities gathers dust. The Communists in the ruling coalition are against both globalization and industrialization, so without new factories being built, employment growth has been almost stagnant, rising to just 2%—a disappointing rate in a country where an estimated 14 million youths enter the workforce every year, but just 1 million get jobs in the regulated, above-ground economy.

Meanwhile, few expect any bold moves New Delhi, especially with national elections due in 2009 and five important state elections scheduled before the end of this year. Thus far, the ruling Congress party's record has been poor; it has lost almost every state election this year and is likely to lose all five of the upcoming ones.

The big hope for a return to the course of reform in India, businessmen hope, will be a new government in New Delhi next year. The gravest danger is that India's messy coalition politics will bring into power another indecisive alliance that will keep the country in policy limbo for another five years. If so, says S&P's Gokarn, it's a meltdown scenario: growth slipping below 6.5%, accelerating the chances of India reverting to its 1991 status when it was plunged into a balance-of-payments crisis.

Source:
http://www.businessweek.com/globalbiz/content/jul2008/gb2008071_743900.htm

Nearly 80 pct of India lives on half dollar a day

Seventy-seven percent of Indians -- about 836 million people -- live on less than half a dollar a day in one of the world's hottest economies, a government report said.

The state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) said most of those living on below 20 rupees (50 US cents) per day were from the informal labour sector with no job or social security, living in abject poverty.

"For most of them, conditions of work are utterly deplorable and livelihood options extremely few," said the report, entitled "Conditions of Work and Promotion of Livelihoods in the Unorganised Sector", seen by Reuters on Friday.

"Such a sordid picture co-exists uneasily with a shining India that has successfully confronted the challenge of globalisation powered by economic competition both within the country and across the world."

Around 26 percent of India's population lives below the poverty line, which is defined as 12 rupees per day, said officials.

Economic liberalisation since the early 1990s has created a 300 million-strong middle class and led to an average annual economic growth of 8.6 percent over the last four years, but millions of the country's poor remain untouched by the boom.

According to the report, based on data from 2004-2005, 92 percent of India's total workforce of 457 million were employed as agricultural labourers and farmers, or in jobs such as working in quarries, brick kilns or as street vendors.

The report said the majority of those working and living under "miserable conditions" were lower castes, tribal people and Muslims and the most disadvantaged of these were women, migrant workers and children.

"This is the other world which can be characterised as the India of the Common People, constituting more than three-fourths of the population and consisting of all those whom the growth has, by and large, bypassed," said the report.

The NCEUS report, which was presented to Prime Minister Manmohan Singh on Wednesday, recommends the government provide social security benefits such as maternity and medical expenses as well as pensions to people working in the unorganised sector.

Source:
http://www.reuters.com/article/latestCrisis/idUSDEL218894

20000 Were Killed by Trains in Mumbai in 5 Years

Indian media often shout the human rights and democracy in India. But so what? A recent report shows that more than 20,000 people were killed by trains in Mumbai alone in 5 years.

Yes, I am not wrong. It is astonishing 20,000 ceased lives in India's finnacial captial and most rich city in a short 5 years. More ridiculously, If I am not wrong, the public transportation system in this "shining" city should be in the hands of an elected government.

India's Central and Western Railway was forced this week to release the harrowing data, showing at least 20,706 people have died over the past five years, after a Mumbai activist, Chetan Kothari, filed a request under the country's Right to Information Act.

The maximum deaths are due to people falling off crowded trains and electrocution of people sitting on the top of the train," Sharma said. He said many others were hit by trains when they tried to run across the tracks instead of using bridges.
. Source.

India, Please Take Care of Human Lives Before Talking Any Other Rights.

Economic and Social Development of China in 2007

By National Bureau of Statistics of China

February 28, 2008

Source: http://www.stats.gov.cn

I. General Outlook

In 2007, the gross domestic product (GDP) of the year was 24,661.9 billion yuan, up by 11.4 percent over the previous year. Analyzed by different industries, the value added of the primary industry was 2,891.0 billion yuan, up by 3.7 percent, that of the secondary industry was 12,138.1 billion yuan, up by 13.4 percent and the tertiary industry was 9,632.8 billion yuan, up by 11.4 percent. The value added of the primary industry accounted for 11.7 percent of the GDP, maintaining the same level of the pervious year, that of the secondary industry accounted for 49.2 percent, up by 0.3 percentage point, and that of the tertiary industry accounted for 39.1 percent, down by 0.3 percentage point. Quarterly data showed that the GDP growth in the first quarter of the year was 11.1 percent; second quarter 11.9 percent, third quarter 11.5 percent and 11.2 percent growth for the fourth quarter.

Figure 1: Gross Domestic Product and its Growth, 2003-2007


The general level of consumer prices in China was up by 4.8 percent over the previous year. Of this total, the prices for food went up by 12.3 percent. The retail prices for commodities were up by 3.8 percent. The prices for investment in fixed assets were up by 3.9 percent. The producer prices for manufactured goods increased by 3.1 percent, of which, the prices for means of production increased by 3.2 percent, and for means of subsistence grew by 2.8 percent. The purchasing prices for raw materials, fuels and power went up by 4.4 percent. The producer prices for farm products were up by 18.5 percent. The sales prices for housing in 70 large and medium-sized cities were up by 7.6 percent, of which, that for new residential buildings went up by 8.2 percent, for second hand housing grew by 7.4 percent, and the prices for rental and leasing were up by 2.6 percent.

Figure 2: Changes in Consumer Prices, 2003-2007




At the end of 2007, the total of employed people in China numbered 769.90 million, 5.90 million more than that of 2006. Of this total, 293.50 million were employed in urban areas, a net increase of 10.40 million, a newly increase of 12.04 million. The urban unemployment rate through unemployment registration was 4.0 percent at the end of 2007, a drop of 0.1 percentage point over that of 2006.

At the end of 2007, China’s foreign exchange reserves reached 1,528.2 billion US dollars, an increase of 461.9 billion US dollars as compared with that at the end of the pervious year. At the end of the year, the exchange rate was 7.3046 RMB to 1 USD, an appreciation by 6.9 percent over that at the end of 2006.

Figure 3: Year-end Foreign Exchange Reserves, 2003-2007


The taxes collected in the whole year reached 4,944.9 billion yuan (excluding tariffs, farm land taxes and deed taxes), up by 31.4 percent or an increase of 1,181.3 billion yuan over 2006.

Figure 4: Tax Revenue and its Growth, 2003-2007



II. Agriculture

In 2007, the sown area of grain was 105.53 million hectares, an increase of 700 thousand hectares as compared with that in the previous year; the sown area of cotton was 5.59 million hectares, an increase of 70 thousand hectares; the sown area of oil-bearing crops was 10.94 million hectares, a decline of 600 thousand hectares; the sown area of sugar crops was 1.67 million hectares, an increase of 100 thousand hectares.

The total output of grain in 2007 was 501.50 million tons, an increase of 3.50 million tons or up by 0.7 percent over the previous year. Of this total, the output of summer crops was 115.34 million tons, up by 1.3 percent, and that of the early rice was 31.96 million tons, up by 0.3 percent. The output of autumn grain was 354.20 million tons, an increase of 0.6 percent.

Figure 5: Output of Grain and its Growth, 2003-2007


In 2007, the output of cotton was 7.60 million tons, a growth of 1.3 percent over the previous year, that of oil-bearing crops was 24.61 million tons, down by 4.2 percent and that of sugar crops was 111.10 million tons, an increase of 11.4 percent, that of tobacco was 2.39 million tons, down by 3.9 percent, and that of tea was 1.14 million tons, up by 10.9 percent.

The total output of meat for the year reached 68.00 million tons, down by 3.5 percent. Of this total, the output of pork was down by 9.2 percent, and that of beef and mutton went up by 6.1 percent and 5.8 percent respectively. The total output of aquatic products was 47.37 million tons, up by 3.3 percent. The total production of timber for the year 2007 reached 69.74 million cubic meters, an increase of 5.5 percent.

Over 1.07 million hectares of farmland was increased with effective irrigation systems and another additional 1.36 million hectares of farmland was guaranteed by water-saving irrigation systems.

III. Industry and Construction

In 2007, the total value added of the industrial sector was 10,736.7 billion yuan, up by 13.5 percent over the previous year. The value added of industrial enterprises above the designated size was up by 18.5 percent. of this total, that of the state-owned and state-holding enterprises grew by 13.8 percent, that of the collective enterprises went up by 11.5 percent, that of the share-holding enterprises increased by 20.6 percent, that of the enterprises by foreign investors and investors from Hong Kong, Macao and Taiwan soared by 17.5 percent and 26.7 percent growth for private enterprises. Analyzed by light and heavy industries, the growth of the light industry was 16.3 percent and that of the heavy industry was 19.6 percent.

Figure 6: Industrial Value Added and its Growth, 2003-2007


In 2007, of the industrial enterprises above designated size, the growth of value added for the mining and washing of coal industry was18.1 percent over the previous year, for the extraction of petroleum and natural gas was 3.9 percent, for textile industry 16.2 percent, for processing of food from agricultural product 16.9 percent, for manufacture of general machinery 24.2 percent, for manufacture of transport equipment 26.2 percent, for manufacture of communication equipment, computers and other electronic equipment 18.0 percent and for manufacture of electrical machinery and equipment 21.5 percent. the growth of the value added for the major six high energy consuming industries were 18.9 percent, of which, that of the manufacture of non-metallic mineral products was 24.7 percent, smelting and pressing of ferrous metals 21.4 percent, manufacture of raw chemical materials and chemical products 21.0 percent, smelting and pressing of non-ferrous metals 17.8 percent, production and supply of electric power and heat power 13.8 percent and 13.4 percent for processing of petroleum, coking, processing of nuclear fuel. The value added growth for the high-tech industry was 17.8 percent over the previous year.



The profits made by the industrial enterprises above the designated size in the first 11 months of 2007 were 2,295.1 billion yuan, an increase of 36.7 percent over the same period of last year.




In 2007, the value added of construction enterprises in China was 1,401.4 billion yuan, up by 12.6 percent over the previous year. The profits made by construction enterprises qualified for general contracts and specialized contracts reached 147.0 billion yuan, up by 23.2 percent, with their paid taxes of 166.1 billion yuan, up by 18.5 percent.


IV. Investment in Fixed Assets

The completed investment in fixed assets of the country in 2007 was 13,723.9 billion yuan, up by 24.8 percent over the previous year. of the total investment, that in urban areas was 11,741.4 billon yuan, up by 25.8 percent; and that in rural areas reached 1,982.5 billion yuan, up by 19.2 percent. An analysis by regions showed that the investment in east areas was 7,231.4 billion yuan, up by 19.9 percent over the previous year, in central areas was 3,428.3 billion yuan, a growth of 33.3 percent, and in western areas 2,819.4 billion yuan, a growth of 28.2 percent.

Figure 7: Investment in Fixed Assets and its Growth, 2003-2007


In the urban areas, the investment in the primary industry was 146.6 billion yuan, up by 31.1 percent; that in the secondary industry was 5,102.0 billion yuan, up by 29.0 percent; and that in the tertiary industry was 6,492.8 billion yuan, up by 23.2 percent.

Table 4: Fixed Assets Investment in Urban Areas and its Growth by Sector in 2007


In 2007, the investment in real estate development was 2,528.0 billion yuan, up by 30.2 percent. Of this total, the investment in commercial residential buildings reached 1,801.0 billion yuan, an increase of 32.1 percent. The completed floor space of commercial buildings reached 582.36 million square meters, up by 4.3 percent. The total sales of commercial buildings reached 761.93million square meters, up by 23.2 percent, of which, that of the commercial residential building were 691.04 million square meters, up by 24.7 percent.



V. Domestic Trade

In 2007, the total retail sales of consumer goods reached 8,921.0 billion yuan, up by 16.8 percent over the previous year. An analysis on different areas showed that the retail sales of consumer goods in cities reached 6,041.1 billion yuan, up by 17.2 percent and the retail sales of consumer goods at and below county level was 2,879.9 billion yuan, up by 15.8 percent. Analyzed by different sectors, the sales of the wholesales and retail trade reached 7,504.0 billion yuan, up 16.7 percent; the sales of the lodging and catering industry was 1,235.2 billion yuan, up 19.4 percent, and the sales of the other industries was 181.8 billion yuan, up 4.5 percent.

Of the total retail sales by wholesale and retail enterprises above designated size, the sales of grain and oil was up by 38.3 percent, meat and eggs up by 40.9 percent, clothing up by 28.7 percent, motor vehicles up by 36.9 percent, petroleum and related products up by 20.5 percent, daily necessities up by 26.5 percent, cultural and office goods up by 22.6 percent, telecommunication equipment up by 8.8 percent, electric and electronic appliances for household use and audio-video equipment up by 23.4 percent, building and decoration materials up by 43.6 percent, furniture up 43.2 percent, cosmetics up by 26.3 percent, gold, silver and jewelry up by 41.7 percent and traditional Chinese drugs and western drugs up by 25.1 percent.

Figure 8: Total Retail Sales of Consumer Goods and its Growth, 2003-2007


VI. Foreign Economic Relations

The total value of imports and exports in 2007 reached 2,173.8 billion US dollars, up 23.5 percent over the previous year. Of this total, the value of exports was 1,218.0 billion US dollars, up 25.7 percent, and the value of imports was 955.8 billion US dollars, up 20.8 percent. China had a trade surplus of 262.2 billion US dollars, an increase of 84.7 billion US dollars over the previous year.





Figure 9: Imports and Exports and the Growth Rates, 2003-2007



The year 2007 witnessed the establishment of 37,871 enterprises with foreign direct investment in non-financial sectors, down by 8.7 percent; and the foreign capital actually utilized was 74.8 billion US dollars, up by 13.6 percent. Of the total foreign direct investment actually utilized, the share of investment in manufacturing was 54.7 percent over the pervious year, the real estate 22.9 percent, leasing and business service 5.4 percent, wholesales and retail trade 3.6 percent and transportation, storage and post service 2.7 percent.



In 2007, the overseas direct investment (non-financial sectors) by Chinese investors was 18.7 billion US dollars, up by 6.2 percent over the previous year.

In 2007, the accomplished business revenue through contracted overseas engineering projects was 40.6 billion US dollars, up by 35.3 percent, and the business revenue through overseas labor contracts was 6.8 billion US dollars, up by 26.0 percent over the previous year.

VII. Transportation, Post, Telecommunications and Tourism

The value added of the transportation, storage, post and telecommunication sectors reached 1,364.9 billion yuan in 2007, up 9.7 percent over the previous year.



The volume of freight handled by ports above the designated size throughout the year totaled 5.21 billion tons, up 13.4 percent over the previous year, of which freight for foreign trade was 1.78 billion tons, up 12.6 percent. Container shipping handled 111.79 million standard containers, up by 21.5 percent.

The total number of motor vehicles for civilian use reached 56.97 million (including 14.68 million tri-wheel motor vehicles and low-speed trucks) by the end of 2007, up 14.3 percent, of which private-owned vehicles numbered 35.34 million, up 20.8 percent. The total number of cars for civilian use stood at 19.58 million, up by 26.7 percent, of which private-owned cars numbered 15.22 million, up by 32.5 percent.

The turnover of post and telecommunication services totaled 1,936.1 billion yuan, up 26.4 percent over the previous year. Of this total, post services accounted for 81.5 billion yuan, up 11.8 percent, and telecommunication services 1,854.5 billion yuan, up 27.1 percent. By the end of 2007, with 8.36 million newly installed lines of office switchboards, the total capacity reached 510 million lines. The year also saw 365.45 million fixed telephone subscribers. This included 248.59 million urban subscribers and 116.86 million rural subscribers. Mobile phone users numbered 547.29 million by the end of 2007, with 86.23 million new subscribers in the year. In total, the number of fixed and mobile phone users reached 912.73 million, an increase of 83.89 million as compared with at the end of 2006. Phone coverage is 69 sets per 100 persons. The number of Internet users was 210 million and wide-band users reached 163 million.

Figure 10: Number of Phone Subscribers, 2003 - 2007


In 2007, the number of inbound visitors to China totaled 131.87 million, a year-on-year rise of 5.5 percent. Of this total, 26.11 million were foreigners, up 17.6 percent; and 105.76 million were Chinese compatriots from Hong Kong, Macao and Taiwan, up 2.9 percent. Of all the inbound tourists, overnight visitors counted 54.72 million, up 9.6 percent. Foreign exchange earnings from international tourism topped 41.9 billion US dollars, up 23.5 percent. The number of China’s outbound visitors totaled 40.95 million, up 18.6 percent. Of this total, 34.92 million were on private visits, a year-on-year rise of 21.3 percent, or 85.3 percent of all outgoing visitors. The year 2007 saw 1.61 billion domestic tourists, up 15.5 percent. The revenue from domestic tourism totaled 777.1 billion yuan, up 24.7 percent.

VIII. Banking, Securities and Insurance
By the end of 2007, money supply of broad sense (M2) was 40.3 trillion yuan, reflecting a year-on-year increase of 16.7 percent. Money supply of narrow sense (M1) was 15.3 trillion yuan, up 21.1 percent. Cash in circulation (M0) was 3.0 trillion yuan, up 12.2 percent. Savings deposit in Renminbi and foreign currencies in all items of financial institutions totaled 40.1 trillion yuan at the end of 2007, up 15.2 percent. Loans in Renminbi and foreign currencies in all items of financial institutions reached 27.8 trillion yuan, up 16.4 percent.



Figure 11: Urban and Rural Households’ Savings Deposit in RMB and its Growth, 2003 - 2007



Loans in Renminbi from rural financial cooperation institutions (i.e. rural credit cooperatives, rural cooperation banks, and rural commercial banks) totaled 3.1 trillion yuan by the end of 2007, an increase of 508.5 billion yuan as compared with the beginning of 2007. The loans in Renminbi for consumption use from all financial institutions totaled 3.3 trillion yuan, an increase of 869.9 billion yuan. Of all consumption loans, those for individual housing totaled 2.7 trillion yuan, an increase of 714.7 billion yuan.

Funds raised in 2007 by enterprises through issuing stocks and share rights on stock market amounted to 843.2 billion yuan, an increase of 283.8 billion yuan over the previous year. Of this total, 283 companies issued A-shares (including newly issued and convertible loan stocks) with 7 companies issued A-share rights, receiving 772.8 billion yuan worth of capital altogether, an increase of 526.4 billion yuan over 2006. The issue of 14 H-shares raised another 70.4 billion yuan worth of capital, a decrease of 242.7 billion yuan. The number of listed companies (with A- or B-shares) on China’s stock market rose from 1,434 at the end of 2006 to 1,550 at the end of 2007, representing 32,714.1 billion yuan worth of market value, a growth of 265.9 percent over the previous year.

The total corporate bonds issued throughout the year reached 1,708.4 billion yuan, an increase of 352.0 billion yuan over 2006. Of this total, the financial bonds were 1,191.3 billion yuan, a growth of 230.8 billion yuan; the enterprise (corporate) bonds were 182.1 billion yuan, an increase of 80.6 billion yuan; and the short-term financing funds were 334.9 billion yuan, an increase of 40.6 billion yuan.

The premium received by the insurance companies totaled 703.6 billion yuan in 2007, up 25.0 percent over the previous year. Of this total, life insurance premium amounted to 446.4 billion yuan, health and casualty insurance premium 57.4 billion yuan, and property insurance premium 199.8 billion yuan. Insurance companies paid an indemnity worth of 226.5 billion yuan, of which, life insurance indemnity was 106.4 billion yuan, health and casualty insurance indemnity 18.0 billion yuan, and property insurance indemnity 102.1 billion yuan.

IX. Education, Science and Technology

In 2007, the post-graduate education enrollment was 1.2 million students with 420 thousand new students and 310 thousand graduates. The general tertiary education enrollment was 18.85 million students with 5.66 million new students and 4.48 million graduates. Vocational secondary schools of various types had 20 million enrolled students, including 8 million new entrants, and 5.3 million graduates. Senior secondary schools had 25.22 million enrolled students, including 8.4 million new entrants, and 7.88 million graduates. Students enrolled in junior secondary schools totaled 57.36 million, including 18.69 million new entrants, and 19.64 million graduates. The country had a primary education enrollment of 105.64 million students, including 17.36 million new entrants, and 18.7 million graduates. There were 410 thousand students enrolled in special education schools, with 60 thousand new entrants. Kindergartens accommodated 23.49 million children.

Figure 12: New Entrants into Education, 2003 - 2007


The amount of expenditures on research and development activities (R&D) was worth 366.4 billion yuan in 2007, up 22.0 percent over 2006, accounting for 1.49 percent of GDP. Of this total, 18 billion yuan was appropriated for fundamental research programs. A total number of 1,540 projects under the National Key Technology Research and Development Program and 2,541 projects under the Hi-tech Research and Development Program (the 863 Program) were implemented. The year 2007 saw the establishment of 9 new national engineering research centers and 6 national engineering laboratories. the number of state validated enterprise technical centers reached 499 by the end of the year. The technical centers at the provincial level numbered 4,023. Some 694 thousand patent applications were accepted from home and abroad, of which 587 thousand were domestic applications, accounting for 84.5 percent of the total. A total number of 245 thousand patent applications for new inventions were accepted, of which 153 thousand were from domestic applicants or 62.4 percent of the total. A total of 352 thousand patents were authorized in 2007, of which 302 thousand were domestic patents, accounting for 85.7 percent of the total. A total of 68 thousand patents for new inventions were authorized, of which 32 thousand were domestic ones, accounting for 47.0 percent. A total of 210 thousand technology transfer contracts were signed, representing 220 billion yuan in value, up 21.0 percent over the previous year. The year 2007 saw 10 times of successful launch of satellites and Chang’e-1 circumlunar exploration satellite was launched successfully.

By the end of 2007, there were altogether 24,700 laboratories for product inspection, including 356 national inspection centers. There were 184 organizations for product certification and management system certification, which accumulatively certified products in 70 thousand enterprises. A total of 3,720 authorized measurement institutions enforced compulsory inspection on 42.18 million measurement instruments in the year. A total of 1,411 national standards were developed or revised in the year, including 747 new standards. Through out the year, a total of 3,350 weather forewarning signals were released and alarm signals were 690 times. There were 1,314 seismological monitor stations and 31 seismological remote monitor network stations. The numbers of oceanic observation stations were 66 and oceanic monitor spots reached 9,200. Mapping departments published 1,946 maps and 417 mapping books.

X. Culture, Public Health and Sports

At the end of 2007, there were 2,856 art-performing groups, 2,921 culture centers, 2,791 public libraries, 1,634 museums, 263 radio broadcasting stations, 287 television stations, 1,993 radio broadcasting and television stations and 44 educational television stations throughout China. Subscribers to cable television programs numbered 151.18 million. Subscribers to digital cable television programs were 26.16 million. Radio broadcasting and television broadcasting coverage rates were 95.4 percent and 96.6 percent respectively. The country produced 402 feature movies and 58 science, educational, documentary, cartoon and special movies. A total of 43.9 billion copies of newspapers and 2.9 billion copies of magazines were issued, and 6.6 billion copies of books published. by the end of the year, there were 3,952 archives in China and 67.87 million documents were made accessible to the public.

By the end of 2007, there were 315 thousand health institutions in China, including 60 thousand general hospitals and health centers, 3,007 maternal and child health-care institutions, 1,400 specialized health institutions, 3,540 epidemic disease prevention centers (stations) and 2,590 health monitoring institutions. There were 4.68 million health workers in China, including 2.04 million practicing doctors and assistant practicing doctors and 1.47 million registered nurses. General hospitals and health centers in China possessed 3.279 million beds. There were 24 thousand community health service centers. the number of rural health care centers was 39 thousand, possessing 675 thousand beds and employing 863 thousand health care workers. In 2007, 3.581 million people were infected by A or B class infectious diseases, with 12,954 reported deaths. the incidence of infectious disease was 272.4 per 100 thousand, with the death rate standing at 0.99 per 100 thousand.

In 2007, Chinese athletes won 123 world championships on 22 sports events. Eight athletes and 2 teams broke 10 world records on 10 occasions. the amateur sports activities were carried out vigorously.

XI. Population, Living Conditions and Social Security

At the end of 2007, the total number of Chinese population reached 1,321.29 million, an increase of 6.81 million over that at the end of 2006. The year 2007 saw 15.94 million births, a crude birth rate of 12.10 per thousand, and 9.13 million deaths, or a crude death rate of 6.93 per thousand. The natural growth rate was 5.17 per thousand. the sex ratio at birth was 120.22.



In 2007, the annual per capita net income of rural households was 4,140 yuan, or a real increase of 9.5 percent over the previous year when the factors of price increase were deducted. The annual per capita disposable income of urban households was 13,786 yuan, or a real increase of 12.2 percent. The Engel coefficient (which refers to the proportion of expenditure on food to the total expenditure of households) was 43.1 percent for rural households and 36.3 percent for urban households. The population in absolute poverty in rural areas with annual per capita net income below 785 yuan numbered 14.79 million at the end of 2007, a decline of 6.69 million over the previous year. The low-income population in rural areas with annual per capita net income between 786 - 1067 yuan numbered 28.41 million, a decline of 7.09 million.

Figure 13: Per Capita Net Income of Rural Households and its Growth, 2003-2007


Figure 14: Per Capita Disposable Income of Urban Households and its Growth, 2003-2007


At the end of 2007, a total of 201.07 million people participated in basic pension program, a year-on-year increase of 13.41 million. Of this total, 151.56 million were staff and workers, and 49.51 million were retirees. A total of 220.51 million people participated in urban basic health insurance program, an increase of 63.19 million, of whom 179.83 million people participated in urban basic health insurance program for staff and workers, 40.68 million people participated in programs for residents. A total of 31.31 million people participated in urban health insurance programs were migrant workers coming from the rural areas, an increase of 7.64 million. Some 116.45 million people participated in unemployment insurance programs, an increase of 4.58 million. A total of 121.55 million people participated in work accident insurance, an increase of 18.87 million, of which 39.66 million were migrant workers coming from the rural areas, an increase of 14.29 million. A total of 77.55 million people participated in maternity insurance programs, an increase of 12.96 million. A total of 2,448 counties (cities, districts) conducted the new cooperative medical care system in rural areas, attracting 730 million farmers which represented a participation rate of 85.7 percent. The total expenditure of the new cooperative medical care system in rural areas reached 22 billion yuan, benefiting 260 million people. In 2007, the urban medical assistance helped 4.07 million people, up by 117.2 percent. The rural medical assistance helped 6.03 million people, up by 150.1 percent. A total of 23.06 million people were funded by the civil affairs department in the rural cooperative medical care system.

The number of people receiving unemployment insurance payment stood at 2.86 million. A total of 22.71 million urban residents received the government minimum living allowances, or 310 thousand more than the previous year. About 34.52 million rural residents received the government minimum living allowance, an increase of 18.59 million.

Social welfare institutions of various types provided 2.05 million beds by the end of 2007, accommodating 1.63 million inmates. There were 128 thousand community service facilities and 10,299 comprehensive community service centers were set up in urban areas. A total of 63.2 billion yuan worth of social welfare lottery tickets were sold, raising 21.7 billion yuan of social welfare funds. A total of 4.2 billion yuan were received from direct donations.

XII. Resources, Environment and Work Safety

A total of 188.3 thousand hectares of cultivated land was used for construction purpose in 2007. An area of 17.9 thousand hectares of cultivated land was destroyed by disasters, 25.4 thousand hectares of farmland was converted into land for ecological preservation. The structural adjustment to agriculture led to a reduction of 4.9 thousand hectares of cultivated land. Land reclamation and re-development programs added 195.8 thousand hectares of cultivated land. As a result, the year 2007 witnessed a net reduction of 40.7 thousand hectares of cultivated land.

The total stock of water resources in 2007 was 2,469.0 billion cubic meters, a year-on-year decline of 2.5 percent, or 1,873 cubic meters in per capita terms, down by 3.0 percent. The annual average precipitation was 608 millimeters, up by 1.9 percent. Large reservoirs in China stored 186.9 billion cubic meters of water at the end of 2007, 5.2 billion cubic meters more than that at the end of 2006. Total water consumption went down by 0.6 percent to reach 576.0 billion cubic meters, of which water consumption for living purposes rose by 1.6 percent, for industrial use up by 2.7 percent and for agricultural use down by 2.2 percent. Water consumption for every 10 thousand yuan worth of GDP produced was 253 cubic meters, a decline of 10.8 percent. Water consumption for every 10 thousand yuan worth of industrial value added was 139 cubic meters, down by 9.5 percent. Per capita water consumption was 437 cubic meters, down by 1.1 percent.

National land surveys and geological explorations discovered a total of 208 new mineral deposits in large or medium size, including 50 energy mineral deposits, 73 metallic mineral deposits, 82 non-metallic mineral deposits and 3 aqueous and gaseous deposits. Increased reserves were found for 77 minerals, including 1.21 billion tons of crude oil, 697.4 billion cubic meters of natural gas and 40.62 billion tons of coal.

A total of 5.20 million hectares of forest were planted, 3.71million hectares of forest were survived, of which 2.56 million were afforested by manpower. Some 2.68 million hectares were afforested through key afforestation projects, accounting for 72.2 percent of the total planted area of the year. About 2.27 billion trees were planted in 2007 by volunteers. By the end of 2007, there were 2,531 natural reserves including 303 national ones and covering a total area of 151.88 million hectares, or 15.0 percent of the total land area of China. A total of 39 thousand square kilometers of eroded land were put under comprehensive treatment programs, and 33 thousand square kilometers of land were closed for nurture and protection in areas suffering water and soil erosion.

Preliminary estimation indicated that the total energy consumption in 2007 amounted to 2.65 billion tons of standard coal equivalent, up 7.8 percent over 2006. The consumption of coal was 2.58 billion tons, up 7.9 percent; crude oil 340 million tons, up 6.3 percent; natural gas 67.3 billion cubic meters, up 19.9 percent; and electric power 3,263.2 billion kilowatt hours, up 14.1 percent. The consumption of major kinds of raw materials included 520 million tons of rolled steel, up 17.4 percent; 3.99 million tons of copper, up by 13.0 percent; 11.12 million tons of electrolytic aluminum, up by 27.6 percent; 10.48 million tons of ethylene, up by 11.4 percent; and 1.33 billion tons of cement, up 10.5 percent.

Figure 15: Total Energy Consumption and its Growth, 2003-2007


Monitoring of water quality on 408 sections of the 7 major water systems in China showed that 50.0 percent of the sections met the national quality standard of Grade III for surface water, 26.5 percent of the sections met the quality standard of Grade IV or V, and 23.5 percent were worse than Grade V. There was no significant change of the water quality in the 7 major water systems as compared with that in the previous year.

Monitoring of oceanic water quality at 296 offshore monitoring stations indicated that oceanic water met the national quality standard Grade I and II in 62.8 percent of the stations, down by 4.9 percentage points from the previous year; water quality at 11.8 percent of the stations met Grade III standard, up by 3.8 percentage points; and water of Grade IV or inferior quality was found at 25.4 percent of the stations, up by 1.1 percentage points. A total of 145 thousand square kilometers of oceanic waters did not meet the quality standard for clean oceanic water, a decrease of 4 thousand square kilometers. of this total, seriously polluted oceanic area occupied 29 thousand square kilometers. Seriously polluted oceanic area in Bohai Sea occupied 6 thousand square kilometers.

In the 557 cities covered by air quality monitoring program, 389 cities reached or topped air quality standard Grade II, accounting for 69.8 percent of all cities under the program; 152 cities attained Grade III, accounting for 27.3 percent; and air quality in 16 cities was inferior to Grade III, accounting for 2.9 percent. of the 342 cities subject to noise monitoring program, 6.1 percent enjoyed fairly good environment, 64.6 percent had good environment, 28.1 percent had light noise pollution, and 1.2 percent experienced medium noise pollution in downtown areas.

The average temperature in 2007 was 10.1℃, which was 0.2℃ higher than that in previous year. Typhoon hit China 8 times in 2007, 2 more compared with that in 2006.

At the end of 2007, the daily treatment capacity of city sewage reached 70.00 million cubic meters, up 10.0 percent over that in 2006. City sewage treatment rate was 59.0 percent, up 3.3 percentage points. The floor space with central heating systems amounted to 2.85 billion square meters, up 7.1 percent. Greenery coverage reached 36.0 percent of the urban area, up 1 percentage point.

In 2007, natural disasters caused 236.3 billion yuan worth of direct economic loss, down by 6.5 percent. Natural disasters hit 48.99 million hectares of crops, up 19.2 percent, of which 5.75 million hectares of crops was demolished, up 6.2 percent. 2007 witnessed 9,260 forest fires, up by 13.3 percent. There was no extra big forest fire. Floods and waterlog caused a direct economic loss of 82.6 billion yuan, up by 46.9 percent and left a death roll of 1,168, up by 54.9 percent. Drought caused a direct economic loss of 78.5 billion yuan, up by 10.9 percent. Oceanic disasters caused a direct economic loss of 8.84 billion yuan, down by 59.5 percent. The occurrence of red tides hit an accumulative area of 11,610 square kilometers, down by 41.5 percent. China registered 25 thousand geological disasters which left a death doll of 598 and made a total direct economic loss of 2.48 billion yuan. The country recorded 6 earthquakes with magnitude 5 and over, 3 of which caused disasters, causing a direct economic loss of 2.02 billion yuan.

The death toll due to work accidents amounted to 101,480 people, a year-on-year decrease of 10.1 percent. The death toll from work accidents every 100 million yuan worth of GDP was 0.413 people, a decline of 26.3 percent. Work accidents in industrial, mining and commercial enterprises caused 3.05 deaths out of every 100 thousand employees, down 8.4 percent. The death toll for producing one million tons of coal in coal mines was 1.485 persons, down 27.2 percent. The year 2007 witnessed 327 thousand traffic accidents, claiming 82 thousand lives, injuring 380 thousand people and causing a direct property loss of 1.2 billion yuan. The road traffic death toll per 10 thousand vehicles was 5.1 persons, a decrease of 1.1 persons.
Notes:

1. All figures in this Communiqué are preliminary statistics.
2. Statistics in this Communiqué do not include Hong Kong SAR, Macao SAR and Taiwan Province.
3. Due to the rounding-off reasons, the subentries may not add up to the aggregate totals.
4. Gross domestic product (GDP) and value added as quoted in this Communiqué are calculated at current prices, whereas their growth rates are at comparable prices.
5. The base figures for calculating the output growth rate of major farm products are adjusted correspondently according to the results of the second national agricultural census. The output of fruits and vegetables are under checking, and will be published separately.
6. Six highly energy-consuming industries are: manufacture of raw chemical materials and chemical products, manufacture of non-metallic mineral products, smelting and pressing of ferrous metals, smelting and pressing of non-ferrous metals, oil processing, coking and nuclear fuel processing, and production and supply of electricity and heat.
7. Output and consumption of rolled steel include duplicated counting of rolled steel as intermediate inputs used for producing other types of rolled steel.
8. The national total of fixed assets investment is larger than the aggregate sum by adding up the subtotals of fixed assets investment in the eastern areas, central areas, and western areas due to the fact that some of the trans-regional investments are not covered by regional figures.
9. The investment in real estate includes the investment made in real estate development, construction of buildings for own use, property management, intermediary services and other real estate development.
10. The original premium income received by the insurance companies refers to the premium income from original insurance contracts confirmed by the insurance companies, same as the “premium received by the insurance companies” in previous Communiqués.
11. The number of people covered in urban basic health insurance programs for urban staff and workers include staff and workers and retirees insured. the urban basic health insurance programs for urban residents refer to urban non-employed residents who are not covered by the urban basic health insurance programs for staff and workers.
12. The consumption of water for producing 10 thousand yuan worth of GDP is calculated at 2005 constant prices. The turnover of post and telecommunication services is calculated at constant prices of 2000.
13. The consumption of energy for producing 10 thousand yuan worth of GDP, the total emission of chemical oxygen demand (COD) and the sulfur dioxide (SO2) of the whole country will be further certified by relevant departments and be published in near future.