China's gross domestic product (GDP) expanded by 10.9 percent in
the first six months of this year, compared with the same period
last year, the National Bureau of Statistics (NBS) announced
yesterday.
After posting a growth of 10.3 percent in the first quarter, the
Chinese economy, now the fourth largest in the world, grew by
another 11.3 percent in the April-June period, the most rapid in
more than a decade. The last time China recorded a growth of more
than 11 percent was in 1994-95.
Despite its blistering rate of growth, the economy appears to be
in good shape, said Bert Hofman, the World Bank's leading economist
for China.
"From a short-term point of view, there still seems little cause
for concerns," Hofman said yesterday. "Inflation remains low; China
is running comfortable current account surpluses, and supply seems
to hold up with demand."
The consumer price index, a key barometer for inflation, climbed
a mild 1.3 percent from January to June. Trade surplus totaled
US$61.4 billion during the same period.
However, "there are some concerns on the efficiency of such a
high, investment-driving growth rate," Hofman said.
Indeed, fixed asset investment, supported by banks awash with
funds, was the leading force buoying current economic growth.
During the first six months, fixed asset investment surged 29.8
percent.
"We understand that this kind of growth is not sustainable," NBS
spokesman Zheng Jingping said at a press conference hosted by the
State Council Information Office.
"An excessive investment growth will result in overcapacity and
an accumulation of financial risks."
The government is taking measures to address the problem, and he
did not rule out further tightening controls.
In the last three months, the central bank has raised the
benchmark one-year lending rate by 27 basis points. It also
increased the proportion of banks' deposits required to be put into
reserves to reduce the amount of money available for loans.
Authorities also introduced a series of measures to curb
speculative investment in the real estate sector.
However, the major driving forces of the economy have shown few
signs of abating, except a small dip in money supply at the end of
June.
Premier Wen Jiabao said last week that adjustment
measures should be strengthened, fuelling speculation that new
cooling moves are in the pipeline.
The second-quarter growth figure, which is even higher than most
observers expected, reinforced many economists' prediction that
those tightening measures could come very soon.
"The economy is not overheated, but it is moving closer toward
overheating," said Niu Li, a senior economist with the State
Information Center, a think tank under the National Development and
Reform Commission. "If necessary adjustments are taken soon enough,
that danger could be avoided."
(China Daily July 19, 2006)