Planning agency puts first half's growth at 10.4pc

PUBLISHED : Wednesday, 12 July, 2006, 12:00am
UPDATED : Wednesday, 12 July, 2006, 12:00am

The mainland's economy is estimated to have grown by 10.4 per cent year on year in the first six months of this year, accelerating from a growth rate of 10.3 per cent in the first quarter, the country's top economic planning agency said yesterday.

The National Development and Reform Commission's Academy of Macroeconomic Research said in a research report published yesterday that it expected full-year economic growth to come in at 10.2 per cent this year.

In May, the National Bureau of Statistics revised the gross domestic product growth rate for the first quarter of this year to 10.3 per cent, up from a preliminary estimate of 10.2 per cent.

Bureau chief Qiu Xiaohua last week said he expected the economy would have expanded by more than 10 per cent in the first half of this year and would 'possibly' grow more than 9 per cent for the full year. The government's growth target for the year is 8 per cent.

The rapid growth in the first quarter, fuelled by soaring capital spending on the back of excessive liquidity and credit, has prompted the central government to step up a slew of tightening measures to cool the economy.

The academy suggested the central bank should increase benchmark interest rates by 0.25 of a percentage point to drain excessive liquidity from the market.

Excessive growth in loans and a relatively high level of fixed-asset investment were signs of overheating in the country's economy, the report said.

'In the near term, the government should take measures to cool down the economic overheating to ensure the national economy will maintain appropriate growth in the long term,' it said. The report was published by the official China Securities Journal yesterday.

'If the monetary measures prove less effective, we suggest the government should raise both bank lending rates and deposit rates simultaneously by 0.25 percentage points until we have accomplished our goals in macroeconomic adjustment and controls,' the think-tank said.

To restrain excessive loan growth, the central bank raised most commercial banks' reserve requirement ratios by half a percentage point to 8 per cent from July 5. This followed a 0.27 percentage point rise in the one-year lending rate to 5.58 per cent in April, the first rise since late 2004.

On Monday the China Securities Journal reported the mainland's money supply growth eased last month for the first time this year.