China to Step Up Lending Curbs

China to Step Up Lending Curbs
13 September 2004

China’s government will step up its lending curbs and investment restrictions because industrial expansion by state companies has yet to be reined in sufficiently, Vice Premier Zeng Peiyan said. “We must increase structural adjustments,’’ Zeng said in a speech to the World Economic Forum’s China Business Summit in Beijing. “Macroeconomic adjustments have been effective, but these are just initial results. We can’t relax the campaign.’’

China’s industrial production growth picked up last month for the first time in six months, the government said Friday, suggesting lending curbs are having less of an impact. Inflation, which may be reported tomorrow, is forecast to have accelerated from a seven-year high, a Bloomberg survey showed. “The government was too slow to implement measures to cool fixed-asset investment,’’ said Bruce Murray, chief representative of the Asian Development Bank in Beijing, said. “That’s why the policies haven’t been as effective as they might.’’

China has clamped down on lending to the steel, cement, real estate and other industries to cool an investment boom that it blames for causing power shortages, clogging transport links and driving up raw materials prices.  China’s investment in factories, roads and other fixed assets rose 32 per cent from a year earlier in August, WuJinglian, a researcher at the cabinet-level State Development Research Center, said last week. Investment has picked up after slowing to 29 per cent growth for the first half, from 43 per cent in the first three months of the year.

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