China to phase out macroeconomic cooling measures - report
Wednesday, October 6, 2004 4:31:52 AM
afxpress.com
BEIJING (AFX) - China will phase out measures aimed at reining in the overheating economy amid fears that the tough controls may lead to a hard landing, the South China Morning Post reported, citing unidentified sources. The Hong Kong-based newspaper said the central government is expected to announce a decision to "adjust" the macroeconomic controls either later this month or early next month. The announcement would be made during the annual national economic conference to plot growth targets for next year, the paper said. At the conference, top government officials are expected to declare "preliminary success" in curbing runaway fixed-asset investment and bank lending. The officials will likely stress that the planned withdrawal of administrative measures does not signal a relaxation of all macroeconomic controls. They are expected to announce that macroeconomic controls in general - including keeping a tight rein on growth in land and money supply - will remain the medium- and long-term policy to prevent the economy from overheating again. "The real situation is worse than official data has suggested," one source was quoted as saying
"Many banks have largely stopped lending for fear of breaching the central government's rules, and this is not healthy." In addition, the sources said policymakers have become less concerned about strong inflationary pressures. "Inflation is mainly driven by rising food prices, but this is good news for the country's millions of farmers," one source was quoted as saying
"The government does not want grain prices to drop just as it is planning to boost the living standards of farmers." Since the middle of last year, the central government has introduced a series of administrative measures aimed at cooling investment in fast-growing sectors such as aluminium, steel, cement, property and auto manufacturing
Banks were ordered to exercise caution when issuing loans, while inspectors were deployed to force local officials to comply with decisions to shut down hundreds of industrial zones built on illegally seized farmland. The measures proved highly effective with investment in the mainland's factories, roads and other fixed assets slowing to 26 pct year-on-year in August from 43 pct in the first quarter. |
