Fear of overheating keeps credit clamps in place, say ministers
Beijing has no intention of even slightly relaxing the ongoing credit squeeze because of the dangers of a return to economic overheating, according to a panel of economic ministers.
'The macroeconomic readjustment and control policy will not be loosened at all,' Ma Kai , the minister in charge of the National Development and Reform Commission, said yesterday.
The progress of the policy, which has been in place since late 2003 to slow the pace of economic growth, was just 'preliminary', he told a press conference on the sidelines of the annual National People's Congress plenary session.
He said although some of the economy's unhealthy and destabilising factors had been curbed, a relapse was possible because the achievements had not been firmly established.
'New problems are popping up as we are addressing the old ones,' he said, pointing to soaring capital investment last year. 'A relapse of runaway investment is still possible. There were 150,000 new projects last year. In December alone, there were 20,000.'
Earlier, Premier Wen Jiabao also warned about the possibility of a return of runaway investment and called for the continuation of the credit crunch.
The government has forecast an economic growth rate of 8 per cent this year, substantially lower than the robust 9.5 per cent registered last year.
Mr Ma's remarks were echoed by the central bank governor and other ministers at the same news conference.
People's Bank of China governor Zhou Xiaochuan said the central bank would use monetary tools to keep the economy on track.
He said that the central bank would strengthen its work on statistical analysis and forecasting, while using tools such as open market operations, interest rates and the adjustment of commercial banks' capital and loan ratios to strengthen macroeconomic controls.
Li Yuan , a vice-minister of land and resources, said the government would continue to control the supply of land to bring fixed-asset investment under control.
'We will continue the policy of controlling the supply of land strictly this year,' he said.
Last year the central government trimmed the number of development zones or industrial estates by 70 per cent and reduced the amount of land set aside for such zones by 65 per cent as part of a nationwide drive to curb investment.
Mr Zhou admitted that speculative funds were flowing into the mainland as a bet on an appreciation of the yuan, but said the inflow was limited.
The mainland's rocketing foreign reserves, which reached US$609.9 billion by the end of last year, were largely the result of trade surpluses, non-trade surpluses and capital investment from foreign companies.
Meanwhile, in a separate meeting with Hong Kong Chief Executive Tung Chee-hwa, Mr Ma and Mr Zhou promised to further strengthen co-operation between the mainland and the city.
Mr Ma predicted that there would be significant progress in co-operation on cross-border infrastructure this year.
Mr Zhou said Beijing would consider further relaxing the restrictions on Hong Kong banks wanting to conduct yuan business.