China to continue economic controls
Xinhua)
Updated: 2006-07-17 16:49
China''s economy still faces challenges with overheating investment and over-capacity in manufacturing despite government attempts to cool growth in the first six months, government figures to be released on Tuesday are expected to show.
The National Bureau of Statistics will publish the gross domestic product (GDP) growth rate for the first half, as well as the latest fixed asset investment growth rate, two important indices that influence economic policy-making and could lead to tighter macro-economic controls.
Both figures are expected to remain high with the GDP rate predicted to exceed the 10.3-percent rise in the first quarter, despite government attempts to curb what many analysts fear could become an economic bubble.
From January to May, urban fixed asset investment jumped an extraordinary 30.3 percent over the same period last year.
Official figures show investment projects approved by local governments contributed 90 percent of the total fixed asset investment, with the remainder initiated by the central government.
This year kicks off China''s 11th Five-Year Plan period (2006-2010), and many long-term major projects are looking to attract capital, which some economists regard as an important contributor to the steep rise in investment.
Excessive lending by banks has been blamed for the over-investment problem. In the first half, loans increased by 2.18 trillion yuan, filling 87 percent of the government''s annual target.
Investment in some cooling industries started to rebound again this year. The investment growth in steel and iron sector had slowed to 7.8 percent in first five months last year, but steel price rises boosted the growth rate to 13.7 percent in the same period this year.
The investment growth in the non-ferrous metal industry also rebounded to 34 percent from 24.7 percent due to the metal prices surging on the international market.
Excessive investment has exacerbated oversupply with the National Development and Reform Commission warning that overcapacity still exists in steel and iron, cement, aluminum, coke and coal.
Production lines with low capacity and outdated technology caused serious pollution and waste, while intensified overcapacity further fostered China''s foreign trade imbalance.
Due to limited domestic consumption and higher production capacity, exports in the first six months rose 25.2 percent to 428.59 billion U.S. dollars, while the trade surplus reached 61.45 billion U.S. dollars, up 54.9 percent over the same period last year.
The rocketing trade surplus has pressured the government to further adjust the exchange rate and led into more international trade disputes.
The government has taken measures to rein in excessive lending, eliminate production lines with outdated technologies, encourage mergers and acquisitions and boost imports.
The People''s Bank of China in April raised the minimum rate commercial banks charge on one-year RMB loans by 27 basis points to 5.85 percent in an aggressive move to discourage lending. It was the first increase since October 2004.
It also required domestic commercial banks to raise their required reserves at the central bank by 0.5 percentage points starting on July 5.
Meanwhile, the government has issued circulars urging local authorities to speed up restructuring of industry hampered by overcapacity and pollution. Minister of Commerce Bo Xilai said the government would replace its policy of "all-out efforts to boost exports" with "encouraging and restrictive measures in equal measure".
Outstanding RMB loans totaled 21.53 trillion yuan (2.7 trillion U.S. dollars) at the end of June, up 15.24 percent from June last year, which was 0.73 of a percentage point lower than the January-May period.
The slight slowdown of the loan growth rate proved the moderate effectiveness of the government''s economic dampeners, and the high growth of GDP and investment may lead to more rigorous controls in the latter half, analysts say.
Updated: 2006-07-17 16:49
China''s economy still faces challenges with overheating investment and over-capacity in manufacturing despite government attempts to cool growth in the first six months, government figures to be released on Tuesday are expected to show.
The National Bureau of Statistics will publish the gross domestic product (GDP) growth rate for the first half, as well as the latest fixed asset investment growth rate, two important indices that influence economic policy-making and could lead to tighter macro-economic controls.
Both figures are expected to remain high with the GDP rate predicted to exceed the 10.3-percent rise in the first quarter, despite government attempts to curb what many analysts fear could become an economic bubble.
From January to May, urban fixed asset investment jumped an extraordinary 30.3 percent over the same period last year.
Official figures show investment projects approved by local governments contributed 90 percent of the total fixed asset investment, with the remainder initiated by the central government.
This year kicks off China''s 11th Five-Year Plan period (2006-2010), and many long-term major projects are looking to attract capital, which some economists regard as an important contributor to the steep rise in investment.
Excessive lending by banks has been blamed for the over-investment problem. In the first half, loans increased by 2.18 trillion yuan, filling 87 percent of the government''s annual target.
Investment in some cooling industries started to rebound again this year. The investment growth in steel and iron sector had slowed to 7.8 percent in first five months last year, but steel price rises boosted the growth rate to 13.7 percent in the same period this year.
The investment growth in the non-ferrous metal industry also rebounded to 34 percent from 24.7 percent due to the metal prices surging on the international market.
Excessive investment has exacerbated oversupply with the National Development and Reform Commission warning that overcapacity still exists in steel and iron, cement, aluminum, coke and coal.
Production lines with low capacity and outdated technology caused serious pollution and waste, while intensified overcapacity further fostered China''s foreign trade imbalance.
Due to limited domestic consumption and higher production capacity, exports in the first six months rose 25.2 percent to 428.59 billion U.S. dollars, while the trade surplus reached 61.45 billion U.S. dollars, up 54.9 percent over the same period last year.
The rocketing trade surplus has pressured the government to further adjust the exchange rate and led into more international trade disputes.
The government has taken measures to rein in excessive lending, eliminate production lines with outdated technologies, encourage mergers and acquisitions and boost imports.
The People''s Bank of China in April raised the minimum rate commercial banks charge on one-year RMB loans by 27 basis points to 5.85 percent in an aggressive move to discourage lending. It was the first increase since October 2004.
It also required domestic commercial banks to raise their required reserves at the central bank by 0.5 percentage points starting on July 5.
Meanwhile, the government has issued circulars urging local authorities to speed up restructuring of industry hampered by overcapacity and pollution. Minister of Commerce Bo Xilai said the government would replace its policy of "all-out efforts to boost exports" with "encouraging and restrictive measures in equal measure".
Outstanding RMB loans totaled 21.53 trillion yuan (2.7 trillion U.S. dollars) at the end of June, up 15.24 percent from June last year, which was 0.73 of a percentage point lower than the January-May period.
The slight slowdown of the loan growth rate proved the moderate effectiveness of the government''s economic dampeners, and the high growth of GDP and investment may lead to more rigorous controls in the latter half, analysts say.
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