China's economy is moving towards a 'soft landing' but the government must
not ease up on its macro control measures, accoding to a state think tank under
the National Development and Reform Commission.
Although July data are hardly grounds for determining a shift, 'various signs
in August indicate that the earlier macroeconomic tuning measures have started
to take effect,' pointing to a soft landing, the Academy of Macroeconomic
Research said.
'The effects are just preliminary. Investment growth is still too high and it
is difficult to eliminate the ripple effect of overheating investment. We must
not relax macro control measures,' the report said.
China has raised interest rates and reserve requirement for banks twice since
late April to rein in rapid growth in credit and investment and introduced a
slew of new policies to cool certain overheating sectors, including real estate.
Urban fixed asset investment slowed dramatically in July and August, after
hitting peak growth of 33.7 pct in June, the state think tank said in a report
published in the official China Securities Journal.
The report forecast investment growth to continue to slow in the coming
months, but growth for the whole year will remain at a relatively high levels.
The FAI growth rates for July and August were 27.4 and 21.5 pct respectively,
6.3 and 5.9 percentage points lower than the previous month.
The rapid growth in credit is also easing, the report said.
The broad measure of money supply, M2, grew 17.9 pct year-on-year at
end-August, the lowest level since the beginning of the year and 0.5 percentage
points slower than in the previous month.
New loans in the banking system for 2006 are expected reach more than three
trln yuan, after hitting 2.5 trln in the first eight months to August, according
to the report.
The central bank set a full year target of 2.5 trln yuan for loan growth at
the beginning of the year.
In the next phase authorities should continue to limit excess growth in
fixed-asset investment, control new projects and clear up those under
construction, and tighten regulation on land use, the report said.
It also urged the government to step up adjustments in the real estate market
to limit speculative investment and high property prices.
The authorities should continue to tighten liquidity by further raising
reserve requirements for banks or interest rates when necessary, it
added.
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