BEIJING: China’s stunning 9.9% gross domestic product (GDP) growth in the first quarter has sparked debate in state media about whether the economy is overheating and if the government should do anything about it.
The first-quarter growth was well above the government target of 7% for the year and puts China on pace to beat its 8% growth last year.
Some economists said power shortages, skyrocketing property investment and rising prices pointed to unsustainable growth. Others insisted the economy was healthy but faced uncertainties such as a sluggish global environment and the deadly Severe Acute Respiratory Syndrome (SARS) virus.
“It’s not totally without foundation for some people to believe that the economy is overheating,” the Economic Daily quoted Gao Huiqing, senior economist at the top government think-tank State Information Centre, as saying.
“The economy is taking off and parts of it have shown excessive growth. Will it lead to an overheated economy eventually and should policies be changed? My view is that there should be policy changes, and the quicker the better,” Gao said.
China has maintained an expansionary fiscal policy since 1998, issuing tens of billions of dollars in special bonds to finance infrastructure projects.
The central People’s Bank of China is also boosting money supply to help spur growth and put an end to deflation.
Beijing has been trying to stave off a possible property bubble as well. Last month the central bank said it planned to raise interest rates and downpayment requirements for luxury home mortgages to help cool off the red-hot sector.
But other government economists are not convinced the economy needs cooling.
“It’s too early to reach a conclusion that a new high-growth cycle has arrived by simply looking at the first-quarter picture,” Wang Xiaoguang, an economist at the State Development and Reform Commission, told the China Business Times.
“The high export growth will not be sustained because of the SARS event and the ongoing world economic weakness, which could trigger trade frictions and restrain exports,” Wang said.
The flu-like SARS has killed at least 65 people and infected more than 1,400 in China since it emerged in the southern province of Guangdong last November.
Analysts say the economic toll will depend on how long it takes to contain the disease. – Reuters