Opinion / You Nuo
Not much can be done to slow boom
By You Nuo (China Daily)
Updated: 2007-04-23 06:54
How fast is too fast? How hot is too hot? These are the questions
puzzling economists watching China's economy.
The National Bureau of Statistics (NBS) reported an annualized GDP growth
of approximately 11.1 percent in the first quarter. This rendered the
government's yearly GDP growth target of 8 percent, made only one and
half months ago, obsolete.
The country's three major urban powerhouses exceeded that growth.
Shanghai grew at 12.6 percent, Beijing at 11.9 percent, and South China's
province of Guangdong, known for its Pearl River Delta, grew a staggering
13 percent.
How should China evaluate the current economic trends? Chinese economists
were divided at last Friday's forum at the Chinese Academy of Social
Sciences.
In truth, not much can be done at the moment to either cool down the
stock market, slow the influx of foreign direct investment, or even cool
city real estate prices. Those markets have grown so large that
administrative intervention can no longer bring about the changes seen in
the 1980s and 90s.
China is at a stage where harsh control measures are unwarranted, or at
least debatable, while moderate adjustments are often unable to yield the
expected results.
China has a few options to keep its economy on the fast track but with
less risk. One of the options is to further decontrol prices for energy
and other key resources. Doing so will not only help moderate the growth
rate but will also make the economy more efficient in its use of energy
and natural resources. It will also make the economy more competitive in
the long run.
Nothing else will cool investors' exuberance over China's equities.
Evidence can be seen in the stock market's pre-emptive sell-off (a fall
of 163 points in the Shanghai Composite Index) on Thursday, in
anticipation of the NBS release of first quarter results. This was
followed by the dramatic 135-point rise on Friday, after the government
refrained from taking harsh measures to rein in the economy.
At 3,580 points, the domestic yuan-denominated A-share market index is
now 35 percent higher than at the beginning of the year. It is likely
that the index will climb to 4,000 in just a few weeks.
Investors are aware of the big picture. They know their money is used to
utilize the largest labor pool on earth and some of the best public
infrastructure existing in the developing world. If the economy can
manage to stay out of trouble, it will keep generating high growth rates
for many years to come.
It would be both useless and unnecessary to try to challenge the logic of
this picture. China's tremendous growth potential is bound to attract
investors. They know that attempting to keep growth to a specific speed
cannot succeed.
Having said this, it must be pointed out that in other areas, such as
energy conservation, not only can government- assigned targets work, but
they can help the economy in the long run.
The NBS first quarter report indicates that industries with high energy
demand have been growing at 20.6 percent annually, among the fastest
parts of the economy.
These industries include petrochemical and chemical, coke-making, fuel
processing, and metallurgical production and processing. Raising energy
prices is the most effective way to curb investment in these industries.
One may ask why, as the GDP was rising at more than 11 percent one year
ago, the consumer price index (CPI), a measure of inflation, remained at
a relatively low 3.3 percent in March. Although economists consider this
rate excessive, I tend to think that part of the threat of inflation is
offset by cheap resources.
E-mail: younuo@chinadaily.com.cn
(China Daily 04/23/2007 page4)
Hot Talks
� China Got Train Technology From Foreigners
� China is in urgent need of aircraft carriers
� Rematches, returns on tap in NBA playoffs
� Why AP chooses to report Cho's sister?
� Virginia Tech Shooting
Most Commented/Read Stories in 48 Hours
Chinese language
No comments:
Post a Comment