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Chinese experts have called for further restraining investment in some sectors in a bid to avoid overproduction in the mid-term this year, China Securities Journal reported on Wednesday, quoting a report by a research team from the State Development and Reform Commission.
The experts from the Macro Economic Research Institute of the commission suggest that China should adjust its pace of economic growth by continuing to check the rapid increase in investment. This is key to maintaining the country's steady economic growth, they said.
They insisted that a stricter policy on investment should also be implemented during the country's 11th Five-Year plan (2006-2010) period.
If China continues relying on high investment to maintain high economic growth, the country will face a serious overproduction problem in the mid-term this year, they warned.
They believed that the key mid-term challenge is to avoid deflation, not inflation, suggesting that the tightening macro regulation and control policy be implemented for a while.
Meanwhile, China should take measures to deal with a possible rapid slowdown in export growth on the one hand and insufficient domestic consumption on the other hand, they said. A dramatic fall in exports would exacerbate the contradiction between overproduction and insufficient domestic consumption.
In the first eight months of this year, investment in cities and towns across the country rose 27.4 percent year-on-year, up 0.3 percentage points compared with the first six months of this year, hitting a record high, said the paper,
In terms of investment structure, investment in the coal, electricity, oil and transportation sectors saw a rapid rise in the period; with that in coal mining and dressing, up 81.9 percent; and that in power, fuel and water production and supply sector, up35.1 percent. The investment in railway transportation increased by 39.2 percent.
The experts also warned against high investment by local governments, which play a key role in stimulating investment, in order to show off their "political achievements."
Local governments are seeking fast economic growth, while imposing risks on the state-owned banks, the experts said.
They noted that China should step up its financial, tax, and investment system reforms so as to establish a mechanism which can control the rapid rise in investments comprehensively.
(Xinhua News Agency September 29, 2005)
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