Chinese economy not overheated, Asian Development Bank economist

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

Chinese economy not overheated, Asian Development Bank economist

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Although there appeared some traces deserving attention in investment and in the aspect of inflation yet so far the Chinese economy cannot be considered as overheated, said Tang Min, Chief economist, Representative of the Asian Development Bank in China when accepting the interview by the Xinhua News Agency reporter on 4 March 2004.

The growth of the Chinese economy witnessed an increase rate of 9.1 percent in 2003, said Tang Min. Though it's higher than the growth rate of 8 percent as seen in the previous year it is still within the range as against the average of the 20 years in the past. He pointed out, various phenomena indicate it's almost impossible for China to have another round of currency inflation. However, attention must be paid to the crop-up of overheated economy in some sectors.

From the beginning to the middle of last year there appeared some overheated tendencies in the field of investment. Once for a period of time before the outbreak of Atypical Pneumonia and afterwards the increase of investment in the fixed assets of the society as a whole had surpassed 30 percent.

As Tang Min holds, judging it as a whole an investment increase of such a high speed cannot be carried on. However, you can't treat different things in the same way in various investment sectors. He pointed out the high-rate investment in the civilian-or-foreign-owned enterprises is quite normal. This shows that after several years of rectification in economy China has finally kicked off the need for the investment from among the civilians and the innate vigor of the economic growth is being strengthened. Nevertheless, in another aspect, part of the local governments dwelled on "political achievement projects" in which they, failing to care about the resources and restriction of the market made blind investment and repetition in construction, these being the major cause for the eruption of the overheated investment. Since the middle of last year the central bank has made a moderate adjustment and control while the government also laid a control on part of the businesses the supply for their land use. Up to now, once the fast increase in credit loans is now tending to a smooth progress with the exchange rate of the People's Currency to remain relatively stable. Tang Min said: "Chinese economy has now entered into a stage for a smooth development." Nonetheless, great attention must be kept against the cropping up of the currency inflation, he also pointed out. In the 4th quarter of last year the currency inflation ever presented a high escalation in China, tipping an increase from 1 to 3 percent. This is because of the price-rise of agricultural produces and in the meanwhile the rise of prices for some raw materials.

Recently, it has a clear indication of price-rise for agricultural produce and in especial the price for the foodstuff, Tang Min said, this is a normal market regulation, which is good for breaking up the stagnation in which the grain price had been kept at a low level a few years ago and also good for increasing the income of farmers as well as the expansion of domestic needs. For the moment, the price of agricultural produce is still in the phase of a recovering increase, which still hasn't reached the level as appeared some 4 or 5 years ago. In another aspect, the fast increase of investment has brought about the swift increase of the prices for some such major raw materials as fuel, non-ferrous metal and iron and steel. All these require our enough attention. Nonetheless, the prices for other industrial products and daily necessities remain stable with a slightly smooth decrease while for the majority of consuming products it still presents a basic market situation without any change, a market of more supply than demand.

If China still carries out well the steady and smooth currency policy this year and enforces an effective control over certain economic sectors and areas on their extravagant investment the currency inflation rate for this year is estimated to sway somewhere between 2 to 3 percent and no big influence will be effected on the macro-economy.

By People's Daily Online

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