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Chinese Growth Exceeds Forecasts
In June, Premier Wen Jiabao ordered banks to tighten lending to address "obvious structural problems." In the first five months of the year, China's banks issued $224 billion in loans, more than three-fourths of the central bank's target for the full year.
Bank lending slowed in June, and the growth of credit is far smaller than in 2003, the last time of serious concern about overheating, said Jonathan Anderson, an economist at UBS Investment Research in Hong Kong.
  China's National Bureau of Statistics Director Zheng Jingping speaks during the Gross Domestic Product news conference in Beijing, China on Tuesday. (Natalie Behring - Bloomberg News) |
"If we didn't have the [growth] number and you had everything else, you wouldn't actually worry about overheating," Anderson said. He does not expect higher rates. "They are going to be keeping their foot on the brake, but I don't think they will be adding any pressure," he said.
In one key regard, however, policymakers are on more complicated terrain than in 2003: China is running a widening trade surplus with the world.
If China crimps growth too much, imports would slow and the trade deficit could expand, exacerbating tensions with the United States and other countries, analysts said. But if China does not slow growth enough, it risks a potentially calamitous investment bubble.
For Western consumers, China's efforts to slow its economy could mean higher prices for the Chinese-made furniture, toys, clothing and electronics. A significant increase in China's interest rates could limit the growth of factories that make such goods, pushing prices down. And if China raises the value of its currency markedly to slow growth, exports almost certainly would go down and prices would go up in Western stores, economists say.
Special correspondent Eva Woo contributed to this report.
