Mild impact tipped
CHINA'S austerity package should have a relatively mild impact on the country's economy this year, a Bank of East Asia report says.
In its September issue of China Analysis, the bank forecast 12 per cent growth this year, against 12.8 per cent last year.
It said the package would stabilise prices for the rest of the year and bring the annual increase in retail prices to 10 per cent for all of 1993.
The bank predicted there would be stringent surveillance of bank lending to restrain overheated fixed-asset investment by state-owned units, which had a staggering growth rate of 70.7 per cent in the first half.
The anticipated slowdown in construction investment had reduced the cost of materials, one of the major causes of strong inflationary pressure, it said.
The real challenge to the contraction measures would appear in the fourth quarter of this year, the bank said.
As 1993 came to a close, the central bank would need to retrieve money supplied in the middle of the year for the settlement of lending certificates, or the so-called white and green strips, in rural areas, it said.