Sharp growth sparks a warning on investment

PUBLISHED : Friday, 27 April, 2007, 12:00am
UPDATED : Friday, 27 April, 2007, 12:00am

China should be wary of a rebound in fixed-asset investment after industrial output hit a 10-year high in the first quarter, a senior state planning official has warned.

Industrial output grew by 18.3 per cent in the first quarter, 1.6 percentage points higher than in the corresponding period last year, Zhu Hongren , vice-head of the economic operations department of the powerful National Development and Reform Commission (NDRC), said yesterday.

Mr Zhu said that the rapid growth in industrial output would increase the risk of volatility in economic development and heighten demand for energy.

'If industrial production continues to expand, it will not only accelerate economic growth, lead to over-consumption of resources and energy, and increase emissions of pollutants, but also make it more difficult to adjust economic structures, put pressure on economic stability and therefore possibly lead to big swings in the economy,' he said.

Mr Zhu said soaring industrial output had put pressure on energy supplies, as industrial energy consumption in the first quarter rose by 16.8 per cent, 5.5 percentage points higher than in the first quarter last year.

He predicted that industrial output would continue to rise rapidly in the second quarter, increasing the demand for fuel, especially diesel.

He said some areas in 12 provinces were still experiencing power cuts during peak hours, especially in regions with distribution bottlenecks, although the demand and supply of coal, diesel and oil products were generally in balance in the first quarter.

'China may still face power shortages in certain areas, such as Hainan and Sichuan ,' Mr Zhu said.

Rapid growth in industrial output also increased pressure on efforts to curb emissions.

Mr Zhu said the power consumption of the six industries that consumed the most energy - steel, nonferrous metals, chemicals, power, petroleum processing and coking and construction materials - increased by 18.2 per cent in the first quarter.

But he maintained that the economy was not overheating, although the gross domestic product grew by 11.1 per cent in the first quarter.

Jia Yinsong , another vice-director of the NDRC's economic operations department, said that exports of energy-intensive products - such as aluminium, steel products, charcoal and iron alloy, as well as investment in these industries - grew too quickly in the first quarter.

He also warned of the risk of a rebound in investment, especially in aluminium and cement, which grew by 49.3 per cent and 39.4 per cent, respectively, in the first quarter compared with the same period last year.

Mr Jia said the government would prioritise its efforts to rein in the exports of products from energy-intensive and highly polluting industries.

Mr Zhu said: 'We are aware of the excessive development of energy-intensive industries. Emissions of pollutants are relatively high, and cutting emissions remains a grim challenge.'

He said the government would make more efforts to ensure an appropriate rate of growth and stability for economic development.

Meanwhile, the growth of the tertiary sector remained stagnant, or even slowed in the past few years, according to Xia Nong, vice-director of the NDRC's industrial policy department.

Hot issue

Soaring growth has raised fears of overheating and fears that Beijing will soon take tough steps to cool the economy

Projected GDP growth this year according to the World Bank 9.6%

GDP growth in the first quarter 11.1%