Gov't moves to stop excessive investment

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Last updated at: (Beijing Time) Saturday, March 06, 2004

Gov't moves to stop excessive investment

The Chinese government is taking measures to check over-investment in some boom industries to prevent overcapacity and rein in economic growth.

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The Chinese government is taking measures to check over-investment in some boom industries to prevent overcapacity and rein in economic growth.

Premier Wen Jiabao has warned more than once that "blind investment" and "low-level repeated construction" occurred in somesectors as the economy accelerated. The State Council also held a national conference in February to discuss over-investment in the steel, aluminum and cement industries.

Economist fear China's economy may be on the verge of over-heating as the fixed assets investment rose 26.7 percent in 2003 from the previous year and the growth rate of the steel, aluminum and cement industries almost doubled.

As bank loans made up 50 to 60 percent of China's fixed assets investments, the monthly growth rate of bank loans jumped to a record 24 percent last August, after a year of continuous acceleration.

The Industrial and Commercial Bank of China, China's largest commercial bank, was the first of the four state-owned commercial banks to announce plans to restrict loans, saying it would "strictly control" new loans to steel, aluminum and cement producers, and would step up scrutiny of consumer loans to the real estate and auto sectors.

The Banking Regulatory Commission announced on February that real estate loans should account for less than 30 percent of a bank's total loans. The People's Bank of China (PBOC) also set theannual growth rate of bank loans from all financial agencies at 16percent for 2004, down from 21 percent in 2003.

Bank reserves were lifted to 7 percent from 6 percent as early as last September, and the measure is taking effect: new bank loans in the fourth quarter dropped to 97.9 billion yuan (11.8 billion US dollars) per month from 230 billion yuan (27.7 billion US dollars) per month in the third quarter.

Though on high alert for signs of over-heating in some sectors,the government means to "regulate" rather than "administer" the investment.

Vice-Premier Zeng Peiyan stressed that in checking over-investment in these sectors, investors should be guided by laws and information on the prospects of the sector, and "administrative actions should not interfere".

The PBOC also stressed "moderate adjustment" in dealing with fresh variables like price rises in the macro-economy while preventing inflation and financial risks.

Source: Xinhua

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