Chinese Fears as Economy Booms

15 September 2004

In sharp contrast to the post-recession US and Europe, latest figures suggest that China's economy is booming to the point of busting.

Worried government officials are considering further ways to peg growth, which saw an increase of 9.7 percent in the first half of this year, well above a full-year target of 7 percent.

And August's inflation rate was 5.3 percent -- despite a clampdown on bank lending, investment in building projects and land transfers.

Says Yi Xianrong, director of the finance development division at the government-run Chinese Academy of Social Sciences: "The situation reveals a need for the authorities to take defensive action before the economy incurs more serious damage. The efforts have not worked well so far, since growth is still high."

Speculation about a rise in interest rates, the first in nine years, has been quashed by the People's Bank of China.

Local governments, the main lenders, have in the past tended to ignore rate changes, making a central adjustment largely futile.

Data sourced from: New York Times; additional content by WARC staff