China: Economists skeptical on target for growth
Robert Saiget
March 7, 2005
The central government is facing a tough battle with the provinces to slow its overheating economy, with trillions of dollars of investment projects already under way or in the pipeline, analysts said.
In his annual work report to the National People's Congress (NPC) Saturday, Premier Wen Jiabao said the government will slow gross domestic product growth from 9.5 percent in 2004 to ``around 8 percent'' this year, despite warning it will be difficult to control runaway fixed-asset investment.
China badly missed its targeted growth rate of around 7 percent in 2004, leading some economists to place little importance on the government's annual exercise of forecasting growth.
``It really doesn't matter if it's 7 or 8 percent. Last year, it ended up at 9.5 percent, and everyone agrees it was substantially underestimated,'' BNP Paribas Peregrine Securities China economist Chen Xingdong said.
Based on such data as energy consumption, Chen believes the real nominal growth rate last year was 18 or 19 percent, while calculating for inflation of up to 7 percent, real growth in 2004 was more than 11 percent.
``Even if the government can't control the growth rate, it can control the statistical data to make sure the growth rate ends up at 7 or 8 percent,'' he said.
Economic planner Ma Kai, head of the National Development and Reform Commission, announced Saturday growth targets in the broad money supply of 15 percent and a 16 percent growth target in fixed-asset investment.
This is after fixed assets grew by nearly 27 percent in 2003 and 25.8 percent last year to seven trillion yuan (HK$6.6 trillion).
``The driving force behind investment growth is strong and investment demand could return to excessive levels,'' Ma said. ``The economic system is unsound, the economic structure irrational and the pattern of economic growth too crude.''
China's M2, or broad money supply, grew 14.6 percent in 2004, five percentage points lower than in 2003, official statistics show.
Citing ``significant inflationary pressures,'' Ma said the government will work to keep inflation at 4 percent this year, following a 3.9 percent official rise in consumer prices in 2004.
Morgan Stanley chief Asian economist Andy Xie said the government clearly sees the need to slow down the economy, but both Wen and Ma's reports lack any concrete measures.
``Fixed-asset investment growth of 16 percent will be very hard to implement because there is lots of liquidity in the banking sector and the provinces have about 25 trillion yuan in projects that have already been approved,'' Xie said. ``This will be very hard to implement and it will depend on how the central government can persuade the local governments to slow down spending. There is a lot of resistance from the local governments to lower growth.'' AGENCE FRANCE-PRESSE
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