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'Stable' city economy bounces back

THE city's economy expanded 5.6 percent on an annual basis in the first half, up 2.5 percentage points compared with the rate in the first quarter, the Shanghai Statistics Bureau said yesterday.

The better-than-expected growth was mainly bolstered by a quick advance in the service industry, particularly the financial sector, thanks to the good performance of the city's stock market and growing businesses in banking, said Cai Xuchu, chief economist at the bureau.

"The city's economy has stabilized and presents signs of rebounding," Cai said.

"The performance in the first half is better than our expectations. However, it will be hard to achieve the government's goal of a 9 percent growth rate for the whole year."

Shanghai's gross domestic product gained 5.6 percent to 661.2 billion yuan (US$96.8 billion) from a year earlier in the first six months. The rate accelerated from the growth of 3.1 percent in the first quarter - the slowest pace since 1992 - and compared with 9.7 percent last year.

The value of Shanghai's service industry jumped 14.2 percent year on year to 381.7 billion yuan, while the agriculture and manufacturing sectors fell 0.5 percent and 3.6 percent respectively to 3.4 billion yuan and 276.1 billion yuan.

The output of the city's financial sector swelled 27.2 percent to 84.9 billion yuan after transactions at the Shanghai Stock Exchange rose 28.2 percent to 14.6 trillion yuan by June.

The benchmark Shanghai Composite Index rocketed 62.5 percent from a year earlier to close at 2,959.36 on June 30.

Meanwhile, outstanding loans in the city grew 19.4 percent to 2.8 trillion yuan, and deposits advanced 25.5 percent to 4.1 trillion yuan.

"The increasing weight of the service industry has reflected the fruits of government efforts to adjust the city's economic structure," said Li Maoyu, an analyst at Changjiang Securities Co.

"But it also reflected a retreat in the manufacturing sector, which suffered from weak external demand."

Shanghai's exports slumped 22.3 percent from a year earlier to US$62.5 billion in the first half due to the fallout from the global financial crisis mirrored in the drop in industrial production. Foreign direct investment in the manufacturing sector also dived 31.8 percent to US$1.2 billion during the period.

The city's retail sales retained a healthy growth of 13.8 percent to 250.6 billion yuan in the first half, while fixed-asset investment gained 9.6 percent to 216 billion yuan.

The Consumer Price Index, the main gauge of inflation, dipped 0.5 percent in the January-June period, while the Producer Price Index, the factory-gate inflation yardstick, withdrew 7.2 percent, showing the threat of deflation still existed but was mild, Cai said.

"Shanghai will continue to carry out stimulus policies to boost local demand, while many Expo-related projects will gain traction in the second half," Cai said.

He said the city would seek "quality growth" to benefit people in the long term.

The bureau said the average disposable income for Shanghai's urban dwellers in the first six months of this year grew 7.6 percent to 14,965 yuan in the first half.


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