China will opt for economic and legal, rather than administrative, means in trying to rein in investment in the second half of this year, vice premier Zeng Peiyan said Sunday. Zeng told the China Business Summit in Beijing the government would continue to improve its macroeconomic controls after its gross domestic product expanded by a robust 10.9 percent in the first six months.
"The focus of macroeconomic controls in the second half of the year will be to contain excessively high growth in fixed-asset investment," he said.
But China would refrain as much as possible from using administrative means to achieve that end, he added.
"We will mainly rely on economic and legal measures," Zeng said.
While China is rapidly transforming from a planned to a market economy, it has been slower to experiment with exchange rate, interest rate and other monetary tools to adjust the pace of growth.
It is still heavily dependent on top-down government directives to curb economic excesses — an approach undermined by the dwindling share of state ownership of the economy.
Beijing's first response to rapid growth in fixed-asset investment, which recently peaked at over 30 percent year-on-year, was to roll out administrative controls.
These ranged from tax and credit curbs on the real estate sector to tougher scrutiny of projects in energy-intensive or polluting industries.
Zeng said in his speech that the government would continue to regulate land and real estate markets as part of its tightening campaign.
But he also referred to the need to improve the exchange rate mechanism of the yuan currency, and to reclaim liquidity from its banking system.
"The market will play a fundamental role," he said of future economic growth.
That shift towards monetary policy options comes after two interest hikes and two increases in bank reserve ratio requirements since April this year.
Attention is now focused on August economic data, due for official release this coming week, as a pointer to possible future tightening measures.
Zeng gave some insight into the direction of those figures when he said year-on-year inflation growth for the January to August period was 1.2 percent, continuing the 1.2 percent rise recorded for the period January to July.
Zeng said the economy had maintained a "sound growth momentum" this year, but warned that "seeking speed alone" was unsustainable.
One area of reform needed was in the setting of prices which should reflect the scarcity of resources, cost of environmental management, and market allocation of resources, he said.
Source: Agence France-Presse
