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SCMP Reporter

THE State Council has launched an unprecedented, large-scale investigation into investment malpractices and price fixing.

  Vice-Premier Zou Jiahua said yesterday two groups would soon be dispatched to the provinces to ensure that local administrations and companies observed the latest instructions on curtailing capital construction and stabilising prices.

  ''We must find a quick solution to the problems of the large-scale expansion of investment in fixed assets and a relatively backward management system for investments and prices,'' Mr Zou said.

  The Vice-Premier indicated the price inspection teams would stop ''random, extortionary and un-authorised'' price rises in necessities including food, raw materials and services.

  Inspectors would put an end to fixed-assets investments that were outside state plans, over-ambitious or bankrolled by unauthorised loans.

  State Planning Minister Chen Jinhua was appointed head of both the price inspection team and the fixed-assets investments inspection teams.

  Team members are drawn from senior cadres in units including the State Planning Commission, the People's Bank of China, the State Economic and Trade Commission, the Ministry of Supervision, the Ministry of Finance, and taxation and auditing authorities.

  This month, the central Government indicated the expansion of credit this year would be limited to 740 billion yuan (HK$657.12 billion), and that the ceiling for fixed-assets investments would be 1,300 billion yuan.

  Inflation would be kept within 10 per cent.

   The Vice-Governor of the People's Bank, Yin Jieyan said at a national meeting on fiscal auditing that the ''key to whether the economic situation this year will be good or bad'' was whether the state could control the scale of credit and investment.

  He said special auditing teams would be sent to central and local departments and administrations to check on illegal or improper credit and other financial policies.

  Special targets would be loans for over-ambitious development schemes, for speculation in the property and stock markets and for the development of unauthorised economic zones.

  Mr Yin said that the bank would ''put its main energy [into] the supervision and management of financial institutions, including the strengthening of auditing work''.

  ''Severe treatment'' would be meted out to violators of Beijing's fiscal policies.

  Chinese economists said they were not optimistic that the Government could attain its fiscal goals.

  For example, internal studies indicate that authorities expect outlays in fixed assets to breach the 1,400 billion yuan mark.

  Chinese sources said the Government's threat of severe punishment was hollow because similar threats in the past had lapsed.

  For example, soon after taking over the governorship of the bank last July, Executive Vice-Premier Zhu Rongji had said he would sack bank officials who had illegally or improperly granted loans.

   At an internal meeting late last year, however, Mr Zhu admitted he had to treat errant staff in the fiscal establishment with kid gloves because ''otherwise the banking system would grind to a halt''.



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