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NDRC calls inspections to slow down economy

(Shanghai Daily)
Updated: 2006-08-04 16:23

China's top economic planner has ordered local governments and banks to inspect newly opened industrial projects as it bids to weed out unauthorized and excess investments to slow torrid economic expansion.

The monthlong check plans to target projects initiated this year with investments worth more than 100 million yuan (US$12.5 million) in all industries, the National Development & Reform Commission said in a Website notice yesterday.

For "red-hot" sectors including steel, cement, aluminum, electricity, automobiles and coal, the inspection threshold will be 30 million yuan for a single project, the agency said.

"We've found irregularities in bank lending, land approval and environmental protection among some industrial projects," the NDRC said. It was aimed at tackling "problems which will likely counter the government's efforts" to ease irrational investments.

The investigation will largely focus on whether projects have illegally seized farm land or if they abide by environment-protection requirements, the notice said. Projects that violate regulations to get bank loans or fail safety criteria may have work halted or scrapped, it said.

China's central government is battling high-flying urban fixed-asset investments which jumped 31.3 percent in the first half, fanning jitters over overcapacity and inflation.

Regulators also are concerned unchecked investments, mostly financed by loans, could weigh on the already-fragile banking industry and derail government efforts to seek a "soft landing" for the economy, which grew 11.3 percent in the second quarter, the fastest since 1994.

The measures "are positive in the longer term as they help contain the risk of economic overheating," said Deutsche Bank's economist Ma Jun, "tightening will become more aggressive in curbing growth."

China plans to reduce steel-making capacity by 55 million tons in 2007, and iron-making capacity by 100 million tons.