Planning tsar lashes out after criticism from US delegate at summit
Andrew K. Collier
Minister denies government playing too big a role in attempt to avoid overheating
Beijing's top economic planner hit back yesterday at criticism the mainland was relying too heavily on government controls to put the brakes on the economy.
'There are many directions we can take regarding macroeconomic controls,' said Ma Kai , minister of the State Development and Reform Commission. 'People think the central government has only used administrative measures to moderate the macroeconomy. From the very beginning, the central government has emphasised that we must use economic, legal and administrative measures.'
Mr Ma was responding to remarks by Kristin Forbes, of the US government's Council of Economic Advisers, at the World Economic Forum's China Business Summit.
Ms Forbes told the conference that China's policies to control overheating 'don't work well', had not been able to slow inflation and were generally ineffective.
'History has told us that administrative controls are not a good way to manage the economy,' she said.
Inflation has risen to above 5 per cent, while fixed-asset investment rose 31.4 per cent in the first seven months, up from 29.5 per cent in the first six months.
Ms Forbes said administrative measures had been unsuccessful in the United States.
Former US president Gerald Ford fought inflation by ordering companies to shun price cuts and handed out buttons saying 'WIN', or Whip Inflation Now. But these actions only deepened the country's economic malaise, Ms Forbes said.
Instead, China should raise interest rates to slow investment and widen the trading band of the yuan to provide a more flexible exchange rate policy, she suggested.
Ms Forbes' blunt remarks drew a sharp response from Mr Ma in front of the several hundred delegates at the Beijing forum.
Mr Ma identified several policies put in place by Beijing that he said could not be labelled as government intrusion in the economy.
These included the issuing of government bonds and two adjustments of interbank lending rates by the central bank.
Food production was increased by reducing taxes for certain companies in agriculture, instead of relying purely on government orders to cut production, he said.
The central government had also attempted to reduce fixed-asset investment by increasing banks' capital requirements, which he described as a financial - not administrative - action. Capital requirements were also raised for loans to overheated sectors such as steel and power.
If outsiders looked solely at the mainland's stance on raising or lowering interest rates, they would have missed the wider range of policy tools authorities had employed, Mr Ma said.