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A double-digit growth forecast for the Chinese economy in the second quarter this year must be disturbing news for the central authorities who are bent on bridling runaway investment.
The State Information Center (SIC) recently predicted the country's gross domestic product (GDP) will increase by 11.4 percent in the second quarter over the same period last year.
Robust growth statistics used to be a favorite with every policy-maker in the country. Yet, economic acceleration seems to have lost much of its luster for the central government, at least for the time being.
Breakneck growth of the Chinese economy since late last year has already alerted the central government to the emerging risk of over-capacity in some key sectors. Particularly anxious are the banking authorities, as domestic banks keep pumping funds into the economy at the risk of more defaulted loans.
Now the new forecast points to the highest quarterly GDP growth since the late 1990s when the country adopted proactive fiscal and monetary policies to cushion the economy against deflation.
The SIC is reasonable to emphasize the low base on which the double-digit growth is built. Thanks to last spring's outbreak of SARS (severe acute respiratory syndrome) the Chinese economy registered only a 6.7-per-cent growth in the second quarter last year, the lowest since 1992.
According to forecasters, a conservative estimate would have put the GDP growth rate in the second quarter last year at 8.8 percent if SARS had not occurred. So the adjusted GDP growth rate for the second quarter this year would be 9.5 percent, a little bit lower than the first quarter's 9.8 percent.
Such a theoretical explanation about the GDP growth appears quite odd, if not useless, since no one would base judgment on a fictitious historical situation.
But to a certain extent the analysis can help us understand why the country's GDP might soar in the second quarter.
Nevertheless, it is far from enough to infer that the country's latest round of rapid growth has peaked.
The central authorities have introduced many harsh macro-economic measures to prevent the Chinese economy from overheating in past months. Though opinions still differ on how and to what degree economic growth should be slowed to a sustainable level, the authorities have reached a consensus on the need to check excessive growth in fixed assets investment as well as credit.
While the central government is eager to see macro-economic measures work, numerous domestic businesses are feeling the pinch of a credit squeeze amid speculation about when it will end.
As a gauge of the country's development momentum, the new GDP growth forecast may disappoint both policy-makers and investors.
However, such an extraordinarily high GDP growth has its own value. It reminds the central authorities of not only the formidability of the challenge they confront but also the persistence they need to tackle it. It takes time for macro-economic measures to produce the desired result. Any attempt to underestimate the problem or seek quick results would only undermine efforts they have already made.
To play down a high GDP growth will mislead investors into believing things will get better soon.
After all, as long as investors cling to their investment passion, the macroeconomic measures will not work effectively.
(China Daily June 3, 2004)
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