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Thanks to a series of timely policies and measures by the government, China is bringing its economy to a soft landing, as over-heated sectors gradually cool off without causing big swings in the overall economic growth.
Fan Gang, a leading Chinese economist, made the comment in a recent interview with Xinhua.
Statistics during the first five months this year showed the growth rate of fixed asset investment as well as raw material import has been dropping, and the price soaring of capital goods has been checked, he said.
Investments in fixed assets grew by 18.3 percent year-on-year in May, a significant drop from the 34.7 percent growth rate in April, according to official statistics.
"This evidence demonstrates that the macro-control policies are taking effect, and an economic soft landing is expected to be fulfilled," Fan said.
The Chinese government has already noticed the overheating signs as early as last summer when the fight against SARS was basically concluded, he said, mentioning the central bank's move to raise the deposit reserve requirement for banks and tighten scrutiny of loans to the real estate development sector since last August.
"The Chinese government's quick response has made it easier to adjust the overheating sectors of the economy," Fan said, adding that the market systems and experienced entrepreneurs also play an important role.
Some economic analysts here said the Chinese central government had been following a macro-control route like this -- Curbing blind investment and low-grade capacity expansion in certain overheated sectors and rectifying the land market first, which is done through tightening credit and land control, then straightening out investments in fixed assets and strictly cracking down on cases of transgressions in relevant sectors, and meanwhile, adopting a series of measures to beef up agriculture and weak links of the economy.
"It is still too early to say that the macro-control goal has been achieved," Fan said.
The investment scale is still too large, and the power and transportation shortage problems have not been resolved, he said.
Due to inadequate electricity supply capacity, 24 provinces, autonomous regions and municipalities have experienced brownouts so far this year. Zhao Xizheng, general manager of the State PowerGrid Company, said China may face the most severe power shortage since the 1980s this summer, with a demand of 30 million kilowatts more than supply.
"Relevant macro-control policies still need to be further implemented to achieve the soft landing goal," Fan said.
"We should draw important lessons from this round of economic overheating." Citing as an example, he said, when the capital goods prices begin to rocket, it's time to take swift action. "If we wait until the consumer goods start to soar, it's too late to take macro-control measures."
(Xinhua News Agency July 13, 2004)
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