Beijing Calls for New Measures to Cool Escalating Economy
China’s Cabinet called for new measures Friday to clamp down on investment and bank lending to head off signs that the country’s breakneck economy may be overheating.
Premier Wen Jiabao and other members of the State Council called for the policy changes after examining data on the money supply and investment in buildings, factories and other fixed assets, the government’s Xinhua News Agency reported.
“The government made the decision after concluding that the investment in fixed assets and money supply increased overheatedly in the first quarter,” Xinhua said.
China’s economy has grown at about a 10% clip for each of the last three years. Throughout the run-up, Chinese leaders have worried that the pace could spark inflation or touch off an investment binge into unneeded projects that will leave already debt-laden banks with more bad loans.
The brief Xinhua dispatch did not provide details on the new policy measures. When similar concerns have emerged over the last two years, the government has allowed banks to raise interest rates and has discouraged lending to real estate development and factory expansions.
In one troubling sign for the economy, the People’s Bank of China said Friday that new loans in the first quarter reached 1.26 trillion yuan, or $156 billion. That’s more than half the bank’s target for all of 2006.
China’s foreign-exchange reserves, already the largest in the world, surged 7% in the first quarter to $875.1 billion, the People’s Bank of China said.
These figures, economists said, indicate that the government was having difficulty managing the amounts of money circulating through the system.