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China's economy edges closer to overheating
Beijing (AFP) Oct 18, 2007 China's inflation rate hovered at near 10-year highs in September as the economy edged closer to overheating, a top planning official said Thursday, signalling that more cooling measures were on the way. The consumer price index rose 6.2 percent in September and 4.1 percent for the first nine months of the year, National Development and Reform Commission vice chairman Zhu Zhixin told journalists. The September figure was down slightly from a 6.5 percent rise in August, the highest inflation China had seen in more than a decade, but it ensured the government's full-year target of 3.0 percent would be exceeded. "We estimate the price level will remain high for quite some time," Zhu said. "There are a number of acute problems and difficulties in China's economy. The trend of fast growth tending towards overheating has not been reversed." He said the economy had expanded by around 11.5 percent in the third quarter, further revealing a lack of bite to interest rate hikes and other measures taken by the government to cool the economy. "The GDP (gross domestic product) growth in the third quarter will be similar to growth in the first half," Zhu said. China will officially announce the third quarter economic statistics next week. China's gross domestic product expanded 11.5 percent in the first half, after recording a blistering 11.9 percent in the second quarter and 11.1 percent for all of 2006. Zhu said that the economy had not yet overheated, citing a basic balance between supply and demand and pointing out that rising food and energy prices were the main reasons for the high inflation. Taking food and fuel out of the equation, the consumer price index for the nine months would have been less than 1.0 percent, he said. However Zhu flagged that further monetary measures would be taken to address the high inflation rate. While Zhu declined to go into specifics on what cooling measures might be taken, economists said a sixth interest rate hike for the year was not far away. Wang Tao, a Beijing-based economist with Bank of America, said next week's official figures will show the economy had grown 11.5 percent or 11.6 percent in third quarter. "(This) shows that economic growth has not fundamentally cooled and that the risk of overheating is still there," Wang told AFP. "This kind of situation means that the pressure on the central bank to raise interest rates continues to exist." Wang said the interest rate hike would likely come before the end of the month. On Saturday, the central bank announced a 0.5 percent hike in the commercial banking reserve ratio, the eighth such rise this year aimed at mopping up the excessive liquidity that is fuelling the booming economy. The most recent interest rate hike came on September 15. Stephen Green, Shanghai-based economist with Standard Chartered, predicted one more interest rate hike this year, followed by another two in the first quarter of 2008. ph-jqf-wf-sai/kma/lh Related Links The Economy
IMF presses growing China on currency
Washington (AFP) Oct 17, 2007China's economy is likely to keep leading Asian growth this year and next, the International Monetary Fund said Wednesday, again calling on Beijing to adjust its currency policies. |
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