The State Council on Wednesday issued a circular calling for
tightener supervision over new construction to curb fixed asset
investment.
The circular was issued out of concern that continued surging
fixed asset growth could push the economy from rapid growth into
overheating.
"Violation of laws, shortcomings in law enforcement and the
loose supervision of new construction projects caused
over-investment and repeated construction in recent years," said
the circular.
Investment in construction, factories and other urban fixed
assets rose 26.9 percent year-on-year to 8.9 trillion yuan (1.2
trillion U.S. dollars) in the first ten months of 2007, the
National Bureau of Statistics (NBS) said last Friday.
New construction projects should pass an array of examination,
approval and recording procedures, the circular said. Projects
should also comply with industrial policies, development plans,
land use regulations and market entry standards, according to the
circular.
Departments at all levels that are involved with economic
planning, land resources management, environmental protection,
construction and statistics must undertake "unified scrutiny" of
new projects, report to higher-level authorities and publicize
progress of the projects on a regular basis.
They must also "strengthen supervision during and after
construction and raise work effectiveness and service awareness",
the circular said.
The first ten months saw ground-breaking on 191,086 new
projects, up 22,518 from a year earlier. Planned investment in
these new projects was 6.67 trillion yuan, up 26.5 percent.
"The government increased the cost of investment to discourage
the start of new projects," said Song Guoqing, a researcher with
Peking University. However, Song said, higher interest rates "put
small and medium-sized private enterprises under considerable
pressure, but had little effect on large state-owned firms."
The central bank has raised the benchmark one-year lending rate
on five occasions this year, to 7.29 percent at present. The
government has also raised the commercial bank reserve ratio on
nine occasions, issued bonds to absorb cash and loosened controls
on capital outflows.
A cursory glance at official statistics shows that
energy-intensive primary industries (farming, fishing, forestry and
the like) and the property sector remained the major driver of
fixed asset investment growth. Local governments outpaced the
central government in approving new construction projects.
During the Jan.-Oct. period, a total of 107 billion yuan went
into primary industry, up 39.9 percent year-on-year. Investment in
real estate was 1.92 trillion yuan, up 31.4 percent.
Investment approved by the central government was 883 billion
yuan, up 13.8 percent, while that approved by local governments was
8.01 trillion yuan, up 28.6 percent.
"This (the circular) shows the central government's
determination to push forward tightening measures," said Yao
Jingyuan, chief economist with the NBS, "The government has
realized it is more important to reduce new projects, especially
those that consume too much energy and cause pollution, rather than
sticking to credit limits,"
Zhu Zhixin, vice-minister of the National Development and Reform
Commission (NDRC), has warned that the risk of overheating
persists. Zhu has also said that containing inflation should be a
macroeconomic priority.
The NBS said earlier last week that inflation, as measured by
the consumer price index, was 6.5 percent year-on-year in
October.
Zhang Hanya, Director of the Research Institute of Investment
with the NDRC, said that increased real estate spending was a major
reason why fixed asset investment had grown.
"Although sales slipped in October compared with the previous
two months, they rose by more than 20 percent from a year earlier,
"said Zhang Yue, an analyst with Beijing Homelink Real Estate
Agency Co., Ltd.
Robust demand, tight supply and higher land development costs
drove up housing prices in 70 major mainland cities by 9.5 percent
year-on-year in October despite government efforts to curb surging
property prices.
"Overall economic growth is stable and fixed asset investment
growth is within market expectations," the NDRC's Zhang said.
(Xinhua News Agency November 22, 2007)
