China May Target More Industries for Curbs, Economist Says
Jan. 26 (Bloomberg) -- China will assess first-quarter reports before deciding whether to rein in its accelerating economy with tougher investment curbs or higher interest rates, a government economist said.
Measures ``could include extending investment restrictions to more industries, increasing interest rates or even raising the reserve requirement'' for the amount of money banks must keep at the central bank, said Qi Jingmei, an economist at the State Information Center, a research arm of the National Development and Reform Commission, the top planning body.
Growth in the world's fastest-growing major economy unexpectedly accelerated to 9.5 percent in the fourth quarter, the National Bureau of Statistics said yesterday. The economy was driven by exports and improved harvests, while government policies cooled investment and inflation, the bureau said.
``The fixed asset investment growth has already slowed as a result of the macro-economic controls,'' Qi said in an interview in Beijing. ``If GDP rises by more than 9 percent this year, transport and energy bottlenecks will worsen which might prompt the government to take more drastic measures.''
The government last year relied heavily on administrative orders to cool investment in industries including steel, autos and aluminum, halting land sales for development and rejecting approvals for new projects. This year, the government has said it will rely more on market-based measures including interest rates, to control the pace of investment and growth.
Monetary Policy
Lehman Brothers forecast yesterday that the central bank will raise its benchmark one-year lending rate 70 basis points this year to 6.28 percent. The central bank increased rates for the first time in a decade on Oct. 29.
China may raise the ratio of reserves that lenders need to keep at the central bank to 9 percent from 7.5 percent, Jonathan Anderson, chief Asia-Pacific economist at UBS AG said on Jan. 24. China last raised the reserve ratio for commercial banks to 7.5 percent from 7 percent on April 25.
Consumer prices increased 2.4 percent in December, the smallest gain in 10 months, and industrial production rose at the slowest pace in more than a year. Retail sales growth accelerated, raising the prospect that consumer demand may start to fuel inflation later this year.
``China isn't about to land anytime soon,'' said Ken Courtis, Goldman Sachs Group Inc.'s vice chairman in Asia. ``For China to come off the boil, it will take a significant tightening of monetary policy. At the moment there's no need for them to do that.''
Growth Forecasts
The government's Qi said she may raise her previous growth forecast for 2005 to 8.8 percent from 8.5 percent because of the stronger-than-expected fourth-quarter growth.
JP Morgan Chase & Co. raised its 2005 economic growth forecast for China to 8.5 percent from 8.2 percent after today's report and Lehman Brothers increased its projection to 8.8 percent from 8.3 percent.
Other government economists including Zhang Liqun expect the economy to grow 9 percent this year.
``The government will neither strengthen nor relax its current measures, although it will improve the macro-economic controls and focus on more market-oriented measures,'' said Zhang, an economist at the Development and Research Center, a research arm of the State Council, China's cabinet.
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