Think-tank plays down growth risk in economy

PUBLISHED : Thursday, 01 June, 2006, 12:00am
UPDATED : Thursday, 01 June, 2006, 12:00am

China's economy faces risks from excessive credit growth, soaring property prices and runaway fixed-asset investment by local governments, but as a whole there are no signs of overheating, a new State Information Centre report shows.

'[Economic] indicators show that overall macroeconomic performance is in a good and stable condition and there have been no signs of overheating,' the National Development and Reform Commission think-tank said.

The mainland economy grew 10.3 per cent year on year in the first quarter as investment in factories, real estate and other infrastructure projects accelerated. The faster-than-intended growth spurred the central government to introduce measures to stifle overheating in some sectors.

But the latest report said there was no significant change in key economic indicators in April and March, the economy was still operating in a 'green light area', and it would continue to enjoy a 'relatively stable base' in the near future.

It identified excessive credit growth, soaring property prices and the rapid increase in fixed-asset investment by local governments as the main concerns.

The report, which was carried by the official Shanghai Securities News yesterday, appeared to be one of many issued by central government ministries in recent weeks to put a positive spin on the economic situation.

Official central bank figures show that new loans in the first four months of the year hit 1.57 trillion yuan, representing more than 60 per cent of the 2.5 trillion yuan target set for the whole year.

The China Banking Regulatory Commission last week asked banks to tighten lending and avoid risky loans. And on Monday, the State Council announced measures aimed at bringing down surging property prices, including higher minimum deposits, higher taxes and restrictions on lending.

The State Information Centre's report warned of a rebound in capital investment in April - reflected in more start-ups of infrastructure projects by local governments. Official figures show fixed-asset investment in urban areas grew by 29.6 per cent year on year in the first four months of this year.

National Bureau of Statistics figures show that investment by the central government grew 18.8 per cent year on year in the first four months to 190.5 billion yuan, but that of local governments surged by 31.1 per cent to 1.61 trillion yuan.

The State Information Centre's report said inflationary pressure remained mild, with the consumer price index rising only 1.2 per cent year on year in April, although that was faster than March's 0.8 per cent.

Economists warn that inflationary pressure is building as a result of fast growth in capital spending and price increases for energy and public facilities.

The National Development and Reform Commission, the top planning agency, last week raised the petrol price by 10.6 per cent, diesel by 12.3 per cent and jet fuel by 10.3 per cent.