A senior researcher under the mainland's top economic planner
yesterday stressed the need to curb excessive investment by reining
in easy credit, adding to speculation that the central government
would soon raise lending rates and capital reserve requirements for
banks.
"The overall economy is on a sound track but there are potential
risks such as inflationary pressure, excessive credit growth and
overcapacity in 12 industries including steel and energy," said
Wang Yiming, vice-president of the Academy of Macroeconomic
Research under the National Development and Reform Commission.
The commission oversees the mainland's economic development and
supervises some pillar industries such as property and steel.
Wang made the remarks at a seminar organized by the Hong Kong
General Chamber of Commerce in Hong Kong yesterday.
To rectify the situation, Wang said the central government could
"seize a chance" to raise the benchmark lending rate again to
tighten market liquidity.
And, "if necessary," the central bank could increase the reserve
ratio again for banks.
He stressed that he was voicing his own opinions and not the
official government position. But he didn't elaborate when and at
what extent such measures should be adopted.
In the past months, the mainland has put in place a slew of
measures to prevent the economy from growing too fast.
In April, the People's Bank of China, the central bank, raised
its one-year lending rate by 0.27 of a percentage point to 5.85
percent in its first increase since October 2004.
In May, a number of policies including taxation were announced
to curb excessive investment in the property market, a sector that
has long been considered the major cause of a runaway economy.
In June and July, the PBC twice adjusted the reserve ratio for
lenders 50 basis points each time requiring commercial banks to put
8.5 percent of their deposits in the central bank starting from
August 15.
The mainland last month also proposed a restriction on
foreigners buying properties on the mainland.
But the measures didn't see an immediate effect until first-half
macroeconomic data were released in July.
The mainland's gross domestic product (GDP) growth was up 10.9
percent year-on-year in the first half. It grew by an astounding
11.3 percent in the second quarter, the highest in more than a
decade.
Fixed-assets investment witnessed a lofty rise of 30 percent in
the first six months, driven by affluent money supply and a huge
inflow of foreign funds.
The situation prompted some economists to call on the central
government to press ahead with tightening policies to prevent the
economy from overheating. And many expected imminent lending rate
hikes.
However, some economists believed the mainland should wait some
time before announcing further cool-down measures. They said it
could be months before earlier measures take effect.
An economist in Hong Kong said yesterday that the tightening
policies implemented by the central government since April have
paid off.
Tao Dong, Credit Suisse's regional chief economist for Asia,
said the purchasing manager index, a barometer to measure private
business activity, sagged by 1.7 percentage points to 52.4 percent
on the mainland in July.
That reflects the effect of tightening steps surfacing in
various sectors, he said in a research note.
(China Daily August 3, 2006)