Mainland warning index showing signs of overheating | South China Morning Post
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  • Mar 28, 2015
  • Updated: 8:46am

Mainland warning index showing signs of overheating

PUBLISHED : Thursday, 02 August, 2007, 12:00am
UPDATED : Thursday, 02 August, 2007, 12:00am

Runaway growth in the mainland has rung alarm bells on the national statistics agency's economic warning index, with industrial production already showing signs of overheating.

The National Bureau of Statistics' warning came just days after the ruling Politburo urged that the country's foremost economic policy priority must be to prevent overheating.

The macroeconomic warning index rose to 114.7 in June, up from 113.3 in May and 110.7 in April, suggesting the economy was heading for a 'relatively heated' area, the agency said.

Of the 10 indicators the agency includes in the index, industrial production is now in the area of 'overheating'.

The indicators of fiscal revenue and urban residential income were 'relatively heated' while those for fixed-asset investment, retail sales, import and export, industrial profits, lending, broader money supply M2 and consumer price index were still in the 'stable' area.

The index has five grades - 'cool', 'relatively cool', 'stable', 'relatively heated' and 'overheating'.

The economy grew 11.9 per cent in the second quarter, an 11-year high, taking first-half growth to 11.5 per cent. Inflation rose to a 33-month high of 4.4 per cent in June, the bureau said last month.

Last week, the Politburo, chaired by Communist Party chief and President Hu Jintao, said that preventing relatively fast economic growth from overheating should be the main task of macroeconomic controls.

Beijing is aiming for gross domestic product growth of 8 per cent and consumer price index growth of 3 per cent for the whole year.

The data raised concerns the economy was overheating and fuelling inflation. A day later, the central bank said it would lift key lending and deposit rates for the third time this year. Taxes on interest income will be cut to 5 per cent from 20 per cent from August 15, lifting the returns on bank deposits even further.

The central bank on Monday said it would raise banks' required reserves for the ninth time in a little more than a year to curb excess liquidity. The reserve requirement ratio will be raised 50 basis points from August 15.

Song Guoqing, a leading economist at Peking University's China Economic Research Centre, warned the economy was moving fast towards overheating. 'Even though the economy could not be justly called 'overheating', it could turn out to be very soon in view of the growth rate for industrial production,' he said.

However, statistics bureau commissioner Xie Fuzhan said the pace of expansion in the first half of the year did not show the economy was overheating, just growing 'relatively fast'.

Mercury rising

The National Bureau of Statistics' macroeconomic warning index in June: 114.7


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