Over-investment urged to be under control
By Fu Jing (China Daily)
Updated: 2005-04-26 22:19

An economic watchdog has said over-investment needs to be curbed, branding the problem "a tumour on the economic body of China."

The photo shows the newly-constructed Runyang Bridge, which costs RMB 5.3 billion, strides across the Yangtze River in east Jiangsu Province, April 14, 2005. [newsphoto/file]

Cao Yushu, spokesman for the National Development and Reform Commission (NDRC), said yesterday that the government will step up efforts to put the brakes on over-investment in sectors including iron and steel, real estate, manufacturing, and power generation.

"We will continue to enforce regulations on land use and bank loans for these sectors," said Cao at the commission's press conference.

Cao's announcement followed a warning about the over-heating economy from NDRC Minister Ma Kai over the weekend.

"While many long term problems with our economic development have not been thoroughly addressed, new challenges continue to occur," Ma told a national conference on economic reform in Shenzhen, southern China.

In addition, the Ministry of Construction organized a national conference in Shanghai over the weekend to discuss strategies to control soaring house prices.

The debate will continue next month when a high-level real estate forum is scheduled to be held in Beihai in the Guangxi Zhuang Autonomous Region. The city suffered badly from China's over-investment in real estate during the early 1990s.

Ma said new challenges included increasing farmers' income, preventing financial fraud and controlling the pressure caused by possible price hike of commodities and services.

During his speech,Ma attributed the problem of over-investment to the government's "wrong role" in its handling of the market economy.

"The government should act as referees in the market-oriented economy, not as investors," said Ma.

Over-investment has been rife across China, pushed forward with the backing of local governments.

Ma said the central government planned to transfer 260,000 hectares of farmland to industrial and housing use this year, but so far local governments nationwide have applied for 800,000 hectares to be converted.

Researchers agreed that reform of the government's role is vital in cooling-down the over heating economy.

Lin Yueqin, researcher with the Chinese Academy of Social Sciences, urged for reform on evaluating the performance of officials to be speeded up.

"Economic indicators, such as GDP (Gross domestic production), should not become major gauges to assess their performance," said Lin.

Only once the evaluating system puts priority on issues such as health and education can local governments turn their attention to other areas, said Lin.

Electricity shortage

Speaking at the NDRC press conference, spokesman Cao also warned that China's electricity supply will continue to fall short of demand because of a shortage in the supply of coal.

He said stringent safety campaigns in coal producing provinces such as Shanxi, Shaanxi and Henan will reduce production this year.

Meanwhile, increased production in the chemical and metallurgical industries will increase the demand for electricity.

"The electricity shortage will be grim in East China, South China and North China," said Cao.

Rail transport capacity is also a problem for the economy, the network conveying just 40 per cent of the cargo which should be transported by rail.

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