China's Economy Shows Signs of Overheating
Excessive growth in some sectors is putting a strain
on transportation and power supplies, driving up the prices
of raw materials and hurting whole industries. Ma Kai,
minister of National Development and Reform Commission
(NDRC)said that if the investment fever in some industries
does not cool, it will seriously affect China's strong
economic growth.
Lin Yueqin, an economic researcher with the Chinese Academy
of Social Sciences said that the automobile industry is
plagued with too many small players with weak development
capabilities. According to him, 70 of 123 plants make
less than 10,000 units a year.
In the first six months of this year, steel and iron
sector production grew by 21 percent, while investment
shot up by 130 percent. Many small-scale facilities, which
had been shut down because of environmental reasons, had
resumed production. These plants uniformly produced low-quality
products.
Lin criticized the cement industry, saying that many
new plants under construction are using outdated technology.
The same problem affects the aluminum industry.
Lin said that meaningful changes could not be made without
reform of the financial sector, which is now almost totally
state-owned.
Lin said, "Investors, not the government, should
have the decisive say in launching new projects."
Many projects were launched in China, not because of the
economic benefits of the project, but because provincial
and local government officials were fishing for fame and
seeking glory.
To manage the reforms, the NDRC will publish information
on supply and demand in these sectors, and will close
down plants producing inferior products and causing serious
pollution. It will also coordinate with the financial
sector to curb loans to projects which use outdated technology
and neglect industrial safety.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
