Growth in China's roaring economy likely to continue apace in 2007

FE Team | Published: July 05, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

SHANGHAI, July 4 (Agencies): Growth in China's roaring economy is expected to continue apace this year, rising 10.9 per cent, a government think tank report said today, urging further economic cooling measures.
The projected annual growth is slightly higher than 10.7 per cent in 2006, supported by strong consumption and high levels of fixed-asset investment, said the State Information Centre, a research arm of the National Reform and Development Commission.
"The trend is of an economy that is moving from a bias of fast growth to overheating," the report published in the China Securities Journal said, adding that the economy was still in an "ascending period" of the cycle.
The country needs to further tighten macroeconomic controls in the second half, with monetary policy generally stable but needing "appropriate tightening" to ensure economic growth remains rapid but stable.
It said that current real interest rates are comparatively low and that the central bank should raise the benchmark lending and borrowing rates and also increase the reserve requirements of banks.
The central bank hiked interest rates twice this year and five times required commercial banks to place more money in reserve in an effort to cool inflation, fixed-asset investment and stock market speculation.
In addition, the central government should consider removing the tax on interest income from bank deposits, the centre said, a move aimed at staunching the flow of savings into the stock market accounts.
The report also forecast that growth in China's trade surplus, would slow in the second half as tax rebates and the appreciation of the currency, which makes exports from China more expensive, bite.
Meanwhile, Chinese government will invest about 62 billion yuan in rural infrastructure this year, the National Development and Reform Commission has announced.
The investment would target projects involving road construction, power generation and water conservancy, and also poverty reduction and community facilities, according to the commission.
The sum is 9 billion yuan more than budgeted for the previous year, said the commission in a guide for government investment in rural areas for 2007.
The guide said the central government had invested more than 60 billion yuan in the countryside in 2006, and more than 36 billion yuan were channeled to grain production, education, sanitation and poverty reduction, which are directly linked to farmers production and living standards.