Curbs on economy working, says China
September 20, 2004
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China's efforts to slow the economy by reining in investment in industries such as steel and cement were working, Vice-Premier Huang Ju said, suggesting further tightening measures such as an interest rate increase may be unnecessary.
"The measures have initially paid off and eased the pronounced contradictions in the economy," Mr Huang said in a speech to a conference in Beijing. Consumer price inflation, which held at a seven-year high in August, was "still relatively stable," central bank governor Zhou Xiaochuan said at the same forum.
China has clamped down on lending and project approvals to cool an industrial investment boom that the government blames for causing power shortages, clogging transport links and driving up raw materials prices.
The government might not need to raise interest rates to slow the economy because the loan curbs were starting to bite, ABN Amro Asia said last week.
Mr Zhou said this month that policymakers will decide whether to raise rates after reviewing August's economic reports.
Investment in China's factories, roads and other fixed assets grew 26 per cent in August, slowing from a 31.1 per cent pace for the first seven months of the year, the government said last week.
Other economic data has been mixed. Consumer price inflation remained at 5.3 per cent in August, while industrial production, exports and imports all picked up last month.
Mr Huang's comments echo those of other government leaders. Vice-Premier Zeng Peiyan said last year that the macro-controls had been effective, though the results are "initial" and the campaign can not be relaxed.
China has relied on lending curbs rather than rates to slow growth in the world's seventh-largest economy. The central bank has kept its one-year lending rate at 5.31 per cent since February 2002. The rate was last raised in 1995.
China's economy is still growing at a "steady and fast" pace and should continue to expand at an annual 7 per cent rate for the next few years, Mr Huang said.
Growth was 9.6 per cent in the second quarter, from 9.8 per cent in the first three months.
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