As the summer heat intensifies, the 'overheated' Chinese economy is showing signs of cooling. On the back of encouraging economic data, the policy of macroeconomic management is set to continue. But there remains one potential peril: the unsound implementation of government control measures might hurt the private sector.
Theoretically, macroeconomic management entails market-oriented measures that employ monetary and fiscal policies to iron out fluctuations in the economic cycle and maintain stable and sustainable growth. They are supposed to be harmless to the economy as a whole, including the private sector. But what has disappointed many about the government's strategy for dealing with this bout of overheating is that it consists of overt administrative measures - mainly restrictions on loan approvals.
Areas where the controls have been imposed include those long monopolised by state enterprises, such as infrastructure, energy and the production and processing of raw materials.
Conflicts between new private companies and state-owned competitors, who wield great influence over policymakers and regulators, were already intense in these sectors. It is imperative that all enterprises be treated equally.
Since the second half of last year, the general perception has been that the current rise in investment has been driven primarily by private enterprises. When the overheating problem became more pressing this spring, some government officials supported the popular view that these private firms were to blame.
It is simplistic to associate economic trends with the activities of any one type of enterprise. Generally speaking, private enterprises tend to be more rational, and hence more efficient in their investment decisions, than state-owned companies. There is, therefore, little justification for blaming the overheating on rash actions of private companies.