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It is still very early to say whether the Chinese economy is overheating, but the government should adjust its lending policies to guarantee it's healthy development, government officials said Friday.
"It is wrong to say the economy is facing or will face overall overheating, but we have been closely monitoring pricing trends,'' said Dai Genyou, the newly appointed director of the Credit Management Bureau under the Chinese central bank.
Dai, who recently transferred from the monetary policy department, made the remark Friday in Beijing at the 2003 Economic Conference on China's Information Industry organized by the China Centre for Information Industry Development.
Dai predicted that with the tightening of commercial bank loans, the total new lending volume will stand at 3 trillion yuan (US$360 billion) by the end of this year, compared with last year's 1.848 trillion yuan (US$179.71 billion).
Although more than 900 billion yuan (US$109 billion) in new loans were lent in the first half of the year, lending volume will be at the same level as last year, or 480 billion yuan (US$57.97 billion).
Dai said the growth of the money supply and new lending will be slightly lower next year than this year.
"While maintaining an overall balance, we should make some structural changes,'' he said.
Dai added that the central bank will continue to tighten new loans given to luxury housing projects and encourage banks to lend more to small and medium enterprises as well as the agricultural sector.
Yao Jingyuan, chief economist at the State Statistics Bureau, also brushed off the overheating theory.
"If we judge the situation with adequate consideration of the whole economy, we will find it wrong to draw such a conclusion.''
He explained that although the consumer price index, a major gauge of inflation, rose by 0.8 per cent in the first 10 months, it happened after falling for more than 20 months. This, he said, points to a certain stability in prices.
In terms of the international trade balance expected to hit a deficit next year, he said it should not be regarded as a deterioration in China's international balance of payment.
He was confident in the growth of China's exports next year, despite the reduction of export tax rebate rates and international pressure from an appreciation of the renminbi.
"Two basic things which influence exports will not change much next year,'' Yao said, pointing to continuing competitive labour costs and the inflow of foreign direct investment.
According to him, the average labour cost for a Chinese manufacturing worker is only 1,200 yuan (US$144) a year. That's 2.2 per cent of the cost for US manufacturers and 90 per cent for Indian employers.
Meanwhile, with the strong inflow of foreign direct investment, which accounts for half of the total of Chinese exports, multinational firms also bring products made in China to other parts of the world.
Forecasts from the Ministry of Commerce on Thursday showed China would sell more than US$380 billion in goods and services to other countries and regions this year.
(China Daily December 6, 2003)
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