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Chinese official urges curbs on
overinvestment
BEIJING -
An economic watchdog has said over-investment
needs to be curbed, branding the problem "a tumor
on the economic body of China." Cao Yushu,
spokesman for the National Development and Reform
Commission (NDRC), said yesterday that the
government would step up efforts to put the brakes
on overinvestment in sectors including iron and
steel, real estate, manufacturing, and power
generation.
"We will continue to enforce
regulations on land use and bank loans for these
sectors," said Cao at the commission's press
conference. Cao's announcement followed a warning
about the over-heating economy from NDRC Minister
Ma Kai over the weekend. "While many long term
problems with our economic development have not
been thoroughly addressed, new challenges continue
to occur," Ma told a national conference on
economic reform in Shenzhen, southern China.
In addition, the Ministry of Construction
organized a national conference in Shanghai over
the weekend to discuss strategies to control
soaring house prices. The debate will continue
next month when a high-level real estate forum is
scheduled to be held in Beihai in the Guangxi
Zhuang Autonomous Region. The city suffered badly
from China's overinvestment in real estate during
the early 1990s.
Ma said new challenges
included increasing farmers' income, preventing
financial fraud and controlling the pressure
caused by possible rises in the price of
commodities and services. During his speech, Ma
attributed the problem of overinvestment to the
government's taking the "wrong role" in its
handling of the market economy. "The government
should act as referees in the market-oriented
economy, not as investors," said Ma.
Overinvestment has been rife across China, pushed
forward with the backing of local governments.
For example, Ma said that the central
government planned to transfer 260,000 hectares of
farmland to industrial and housing use this year,
but local governments nationwide have already
applied for the conversion of 800,000 hectares.
Researchers agreed that reform of the
government's role is vital in cooling-down the
overheated economy. Lin Yueqin, a researcher with
the Chinese Academy of Social Sciences, said that
reforms of the evaluation procedures for
government officials should be accelerated.
"Economic indicators such as GDP (Gross domestic
product) should not be the major gauges used to
assess their performance," said Lin. When
officials are evaluated primarily on GDP, they
have an incentive to approve industrial projects
regardless of their poor long-term prospects or
damaging ancillary effects. According to Lin, only
once the evaluating system puts priority on issues
such as health and education can local governments
turn their attention to other areas, said Lin.
Electricity shortage
Speaking
at the NDRC press conference, spokesman Cao also
warned that China's electricity supply will
continue to fall short of demand because of a
shortage of coal. He said stringent safety
campaigns in coal producing provinces such as
Shanxi, Shaanxi and Henan would reduce production
this year. Meanwhile, increased production in the
chemical and metallurgical industries will
increase the demand for electricity. "The
electricity shortage will be grim in East China,
South China and North China," said Cao.
A
chronic shortage of rail transport capacity is
also a major problem for the economy, with the
existing rail network meeting just 40% of current
demand for freight haulage.
(Asia
Pulse/XIC) |
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