Chinese Premier Zhu Rongji said he hoped for a sustainable growth rate for the Chinese economy, and warned against a frenzied development of the plush real estate sector, which he predicted is not "risk free".
Meeting a group of domestic entrepreneurs in Hong Kong on Wednesday, Zhu said that sound GDP growth must be supported by "two legs"- capital investment as well as consumption. He asserted that the uncontrolled development of luxury property projects would result in a rise in bank debt loans and huge numbers of unsold homes, creating trouble for the economy.
Zhu specifically noted Shenzhen, a city neighboring Hong Kong. Currently, the city's suburban land has been used up, forcing local property developers to look for land in other counties, which Zhu said, "very dangerous".
"Today's Hong Kong could be tomorrow's Shenzhen," the premier warned.
Hong Kong's economy is heavily dependent upon its property market. Since the 1997 Asian financial crisis, the real estate sector there has never picked up, and the local economy remains in the doldrums.
Zhu Rongji said that all of China's domestic enterprises should remain vigilant against runaway property projects beyond the means of ordinary Chinese wage earners. As to some chief executives' comments that he might be "too pessimistic", Zhu, a little bit agitated, said: ``Let's wait and see whether I am too pessimistic, or you are too optimistic."
He said it is impossible for any country to maintain a rapid and healthy pace of growth relying only on investment or bank loans. "Consumption is the other indispensable leg to bolster growth," Zhu said.
Unsold top-end buildings in Chinese cities like Shenzhen are stacking up, straining the lifeline of banks' credit.
Zhu predicted China's economy would grow 8 percent this year, which he said is "too good", making continued growth at such heights in the coming years "more difficult". He cautioned when the property market tumbles, it will drag down the iron and steel, cement, glass and other sectors, forcing the overall economy to a standstill.
To encourage consumption, Zhu said the central government will continue to increase the salaries of government and state firm workers, improve conditions for the retired, and strengthen the purchasing power of the large rural farming sector.
The history of the United States and Japan proves that China must not neglect consumption, he said.
(China Daily November 22, 2002)
