Concerns about overheating Chinese economy fading: Deutsche Bank

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Last updated at: (Beijing Time) Tuesday, February 24, 2004

Concerns about overheating Chinese economy fading: Deutsche Bank

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Concerns about an overheated economy in China are fading as the growth of investment in fixed assets and in loans slows, said Jing Ulrich, head of Deutsche Bank's Hong Kong-based Greater China Equities, on Monday.

Ulrich, speaking at a five-day conference that opened in Shanghai Monday, said optimism was growing.

"Primary among recent concerns with investors were worries about a potentially overheating economy and markets, and the potential for the government to react by applying constraints on lending and investment. This skepticism has now turned to cautiousoptimism," said Ulrich.

"First loan growth, then money supply growth and finally fixed asset investment have begun to moderate since October 2003 and with these areas under control, the risk of a bubble bursting in China's economy has diminished," she said.

She predicted a steady growth in China's economy this year.

Deutsche Bank summarized the positive market themes for China in 2004 as the moderation of record investment as the central government reins in lending growth and restricts capacity in overheated sectors.

Driven by car and home sales, household consumption in urban areas would show robust growth. On the other hand, rural incomes were set to increase faster with rising grain prices and tax cuts.

Ulrich believed that growth in consumer spending would have a positive impact on the Chinese economy in two areas.

"The first will be to take up the slack in spending as fixed asset investment growth slows down in 2004, and the second will beto improve the quality of loans at the domestic banks," she said.

The recent capital injections and initiatives to restructure state banks into modern commercial entities showed the Chinese Government's resolve to tackle problems in the banking sector. "They should be well received by the market," said Ulrich.

However, Deutsche Bank warned of some constraints on the growthof the Chinese economy, such as raw materials shortages and infrastructure bottlenecks that would limit growth of heavy industries.

The meeting attracted over 600 participants from the world over,including investors, banking representatives, government officials.

Deutsche Bank, with 803 billion euros in assets, offers financial services to 13 million clients in 76 countries. It has operated branches or business offices in Beijing, Shanghai, Guangzhou and Hong Kong.

Source: Xinhua

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