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China to ease pre-Olympics if GDP slows-economist
2006-12-19
BEIJING - China will immediately loosen economic policies if necessary to sustain economic growth in the run-up to the 2008 Olympic Games in Beijing, a prominent economist said on Wednesday. Wang Jian, secretary-general of the China Society of Macroeconomics, an arm of the country's main economic planning agency, the National Development and Reform Commission (NDRC), said he saw a chance of an economic slowdown next year that could drag on until late 2008 or 2009 if not addressed. "But given the Beijing Olympics, would the Chinese government allow such a slowdown?" Wang, speaking at a steel conference, asked rhetorically. "I've heard a lot of debates about this at the State Council, and the central-government leaders have decided that, if there's too great a slowdown, they will loosen controls immediately," Wang said. The State Council is China's cabinet. Wang said slowing loan growth in recent months was evidence that a raft of credit and administrative curbs aimed at cooling an investment frenzy was starting to bite. The economy could also catch a chill next year from the spillover of a housing-induced U.S. slowdown, he added. "If there is a slowdown under way, then we should see fixed-asset investment growth of less than 15 percent by next June," Wang said. Annual fixed-asset investment growth slowed to 26.6 percent in the first 11 months from a peak of more than 31 percent in the first half. The central bank has raised interest rates twice and banks' reserve requirements three times since late April to deter wasteful capital spending. The government has tightened land-use and environmental protection criteria that new projects must meet. It also named and shamed senior officials from Inner Mongolia in August for permitting the unauthorised construction of a power plant, Wang noted. The sacking of Shanghai party chef Chen Liangyu in September after a probe exposed that social security funds had been diverted into illicit loans and investments also sent a message to growth-hungry local officials to go slow, he said. But Wang said the evidence of ebbing growth was still fragmentary. "Fixed-asset investment hasn't fallen by as much as expected, so leaders are worried that the hot investment isn't completely over," he said. Speaking to reporters later, he said he did not expect the yuan to rise faster next year than it has in 2006. In remarks prepared for delivery at the conference and distributed to the press, Wang said a slowdown could set in by the second quarter and drive full-year GDP growth below 8 percent -- snapping a four-year streak of double-digit growth. He said it was important not to become fixated with sustaining 10 percent growth: macro-economic policy could mitigate economic cycles, but it could not eliminate them. The priority for policy makers, he said, should be to prevent big swings in investment and production from triggering volatility in the financial sector. (Reporting by Lucy Hornby and Niu Shuping, writing by Alan Wheatley, editing by Ken Wills; Reuters Messaging, alan.wheatley.reuters.com@reuters.net; +8610 6598-1288)))
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