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Wen urged to tighten financial reins

Zhu Rongji

Officials see 2003's fast-paced growth of 9.1pc as sign of an overheating economy

Premier Wen Jiabao is under increasing pressure to adopt a so-called 'appropriately tight' monetary policy to rein in the overheating economy, sources in the central government said yesterday.

The economy grew 9.9 per cent in the fourth quarter of last year and surged 9.1 per cent for the whole year - the fastest pace since 1997, which recorded growth of 8.8 per cent, and much higher than forecasts of 8.5 per cent.

As the strong growth is expected to continue in the current quarter, sources say more officials support calls for tougher measures to further curtail state spending and tighten bank lending this year.

They said official economists and planners were constantly talking about an 'appropriately tight' monetary policy during discussions on this year's various economic growth targets.

Premier Wen is expected to announce official growth targets for this year at the annual plenary session of the National People's Congress scheduled for March.

When he was vice-premier in 1995, Zhu Rongji adopted tighter monetary policies and successfully cooled down the economy.

Government sources said the mainland leadership was not convinced the economy was overheating despite the impressive growth figures, reports of massive power shortages in main industrial cities nationwide and the soaring prices of raw materials.

Mr Wen reportedly warned government officials against 'talking about [economic] overheating' at a recent national working conference in Beijing.

Many observers interpreted his remarks as voicing support for continuing the economic growth pattern.

However, government sources said the debate on the state of the economy was still intense among officials behind closed doors.

'Past experiences have shown that new leaders, out to impress and make their mark, are usually generous with government spending and aggressive in economic expansion in the first year of their terms,' one source said.

Since taking office in March last year, President Hu Jintao and Mr Wen have announced that the Chinese economy is entering a new phase of faster growth.

But a government source said some decision-makers in Beijing seemed to have realised the growth rates could not be sustained.

An increasing number of influential economists - including the respected Wu Jinglian - have openly urged the central government to adopt tighter monetary policies this year to prevent a harsh economic landing down the road.

Shawn Xu Xiaonian, head of research at the China International Capital Corporation, said the mainland's economic expansion, mainly led by massive government spending, could risk producing more bad loans.

'There seems to be massive output, but little gain in efficiency in the economy,' he said. 'This is very worrying.'

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