China looks at new steps to cool off economy
Beijing, August 2:
Officials were meeting today to look at new steps to cool off China’s sizzling economy as its top planning agency called for tighter bank credit and curbs on construction, state media reported.
The reports suggested Beijing believes earlier measures, including an interest rate rise in April, are failing to contain runaway growth in spending on factories and other assets that Chinese leaders worry could ignite a financial crisis. More than 100 economic officials were at the five-day long meeting that began yesterday in the seaside resort of Beidaihe, the Xinhua News Agency and newspapers reported.
The officials were looking at how to slow down economic growth when some economists say it is already overheating’ improve energy efficiency and narrow a growing gap between rich and poor. They didn’t identify any of the participants or say what possible measures they were considering. A report by the Cabinet’s National Development and Reform Commission called for stricter controls on the number of new projects, more stringent land management and tighter bank lending. China’s economic growth surged to 11.3 per cent in the second quarter, driven by fixed-asset investment that rose by 29.8 per cent during the first six months. Investment in some industries grew even faster, reaching 44.5 per cent in auto manufacturing and 40.6 per cent in textiles. It blamed local governments’ pursuit of rapid economic development, excessively driven by growth in fixed assets investment. The China Daily reported, “Rampant illegal land use exacerbated problem.”
President Hu Jintao’s government wants rapid growth to spread prosperity to the hundreds of millions of people who have been left behind by China’s economic boom. But Chinese leaders worry that runaway spending on factories, luxury apartments and other unneeded new assets could ignite inflation or leave companies and banks with dangerously high debt.
The government tried to rein in credit by raising interest rates and ordering banks to set aside more reserves, reducing the amount of money available for lending. Economists say another rise in interest rates is possible, as is a rise in the value of China’s currency, the yuan, which might restrain exports by making its goods more expensive. Beijing has raised taxes on real estate sales to discourage speculation, imposed limits on foreign investment in property and banned some projects such as luxury villas outright. But despite urgent statements from the central government, lower-level officials often are reluctant to enforce controls that might hurt local economies.
‘Control on foreign investment’
BEIJING: China’s steel industry wants tighter controls on foreign investment, state media reported on Wednesday, amid growing concerns a more protectionist mood may be taking hold in Asia’s second-largest economy. It should be made harder for foreign investors to buy shares in domestic steel firms, especially the large ones, said Luo Bingsheng, vice-chairman of the China Iron and Steel Association. “The sector should be controlled by Chinese state-owned and privately owned steelmakers, instead of foreigners, as it is one of the country’s most important basic industries,” Luo said. A national steel industry policy launched last year already bans foreign investors from having a controlling stake in Chinese steelmakers. — AFP