Thread: China tries to apply brakes to economy

China tries to apply brakes to economy

· Premier warns of 'difficult' battle to contain inflation
· Growth forecast to slow as politicians seek stability

Tania Branigan in Beijing
The Guardian,
Thursday March 6 2008

China's economy faces a "difficult" battle against inflation and overheating, its premier, Wen Jiabao, warned yesterday, as he opened the annual session of the National People's Congress with a pessimistic forecast.

His remarks come in the wake of January's 7.1% rise in the consumer price index, the sharpest for 11 years, which demonstrated that repeated increases in lending rates and the deposit reserve ratio have failed to curb price rises.

They will cause concern internationally as well as domestically, given the potential for more expensive Chinese products to export inflation. The annual inflation rate more than tripled last year to 4.8%, well above the official target of 3%. This year the target has been raised to 4.8% - but many analysts believe it could rise to more than 6.5%.

"The current price rises and increasing inflationary pressures are the biggest concern of the people. Upward pressure on prices will remain great this year," Wen said, delivering the annual government work report.

He warned that there were still "deep-rooted" economic problems, citing the imbalance between investment and consumption, and arguing that too much investment was going into primary industry and too little into the service sector.

Wen underlined the government's determination to ensure stable growth by announcing a growth target of 8% - well below China's average annual rise in GDP of 9.6% over the last two decades. GDP growth ran at an estimated 11.4% in 2007, although analysts are predicting it will slow to between 9% and 10% this year.

Gallup's annual world affairs survey, released last month, showed that more Americans now see China as the world's leading economic power than opt for the US. But Communist leaders are well aware of the economy's vulnerabilities.

Much of Wen's speech covered familiar themes, stressing the need to reduce inequality and promising substantial extra funding for social security, up 24%; healthcare, 25%; and education, 45%.

Those increases are substantially greater than the 17.6% rise in military spending, which alarmed Japan and the United States this week - but come from a much lower base. Education spending, for example, will total just 156bn yuan (£11bn).

Wen restated the need to step up environmental protection, promising a 31% rise in funding and warning that "backward" factories in industries such as coal and steel would be shut down.

He also announced that the country would accelerate its efforts to ensure product quality and safety, in a nod to concerns exacerbated by a series of scares about food, toys and other goods. "It is imperative that people feel confident about the safety of food and other consumer goods, and that our exports have a good reputation," he told almost 3,000 deputies gathered in Beijing's Great Hall of the People.

Although the role of the legislative body is largely symbolic, it does provide a forum for discussion and lobbying on important issues by the political elite.

http://www.guardian.co.uk/business/2008 ... nomy.china

This over heated market will in-turn increase inflation in the US... get ready for more bad news

Maybe I am wrong....but I have often wondered about when something comes too soon, and all that means, that we or anyone else hasn't gotten any better.

Granted I'm not a brain.....just an observation in my lifetime. We (America) were the big bad guys....they talked of conservation and all....but all they did was ship the factories out to China and say "look....our air is better now!!!". Seems we just play a global shift of pollution and population and everything else as if this makes us equal.....


the pearl under the shell game.

Crazybird ... welcome back... I like your analogy of the situation