| China's economy not overheated
2003-08-09
China Daily
China's economy is still on the right track despite worries about
"overheated" growth, said an article in the China Economic Times.
China's
gross domestic product (GDP) increased 8.2 per cent year-on-year in the first
half of this year, overcoming the shadow of SARS which plagued the economy in
the spring.
While it is generally believed the economy is entering a new
boom period, some doubt the high growth rate is normal.
The worries are
mainly about the surging monetary supply and investment in real estate
development, which could yield bubbles and inflation.
Fixed-asset
investment in the first half of this year soared 31.1 per cent year-on-year. The
balance of bank loans increased 22.9 per cent, the highest growth rate since
1996.
Growth in these areas is basically in line with the demand, and
there are no signs showing the economy has been "overheated," said the
article.
The article attributed the current boom to the government's
sound macro-economic policies and restructuring efforts, which led to the
maturity of some "propellant" industries such as real estate, information
technology and car manufacturing.
Although SARS has curbed employment and
farmers' income growth, its impact on the overall economy is
limited.
China's economy has long been haunted by a deflation tendency
since the 1997 Asian financial crisis.
Thanks to the government's line
of tapping domestic potential, featuring a pro-active fiscal policy and a stable
monetary policy, the GDP growth was maintained at 7 to 8 per cent on average
each year.
The economic restructuring has borne fruit and the economy is
about to see a new phase of rapid growth, said the article.
However,
attention should be paid to over-investment in some places and industries, the
article warned.
After the re-election of local legislative and government
organs earlier this year, many new officials have taken office, ambitious to
leave their mark on local economies.
In a bid to court outside
investment, some local governments have planned land developments for so-called
high-tech zones or industrial parks.
The zeal of local officials for new
zones may result in overlapping projects, as many places are doing the same
thing. Should these new zones fail to attract enough investors, the land and
money used for preliminary development, including bank loans, will be wasted,
the article said.
The growth of the steel industry also needs to be
closely watched, said the article.
Investment in the industry rocketed by
153.7 per cent year-on-year in the first quarter of this year. But the newly
opened steel plants are mostly small-sized and produce medium- and low-end
products.
The fever in steel and other industries, as well as the
construction of new high-tech zones, contributed to a 20.8 per cent surge of the
monetary supply in the first half this year.
However, the current boom is
not likely to trigger inflation in the near term, the article said, on the
grounds that consumption has yet to improve.
Private consumption dropped
0.6 per cent in the first half of this year, despite robust growth in
fixed-asset investment.
The consumer price index recovers slower than the
price of industrial elements. Locked in worldwide deflation, there is not much
room for the rise of domestic prices.
The current economic situation
cannot be rashly portrayed as "overheated" and any adjustment of
investment and monetary policies should be moderate and consistent, the article
said.
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