CHINA's overheated economy has reached its peak temperature, but a gradual cooling is unlikely in 1993 short of drastic intervention, warns a local China expert.
Mr Thomas Chan, co-ordinator at the Hongkong Polytechnic's China Business Centre, said that inflation would become unmanageable by the middle of next year if fixed capital investment continued to grow excessively.
He said: ''China's economic growth in 1992, the fastest around the world, is largely supply-rather than demand-driven.'' Fixed capital investment increased by 35 per cent and industrial output by 20 per cent on average in the whole of China during the past 12 months. In some cities, industrial output rose more than 50 per cent.
Despite attempts by the Beijing government to keep inflation and money supply under control, Mr Chan argued that the increasing autonomy of the provincial governments had complicated the issue.
In 1988 China cut bank loans and held back investment spending, but the central authorities were now both unwilling and less able to resort to such drastic measures, he said.
The spectacular economic growth in 1992 has seen a much wider discrepancy between the cities along the coast and those further inland.
Mr Chan said the cost-of-living index in some boom cities had gained up to 10 per cent, which would spill over to other less-developed cities soon.
