Even from distant New York, Jeannette Dong could feel the boom in China's giant economy. Thinking of returning to her native Shanghai after 10 years on Wall Street, she sold her Internet stocks and invested in a three-bedroom apartment in a nice part of town.
That was two years ago. Since then, two good things have happened to the 35-year-old investment adviser. She began her new life in November, and the 1,950-square-foot apartment has doubled in value, to around $350,000.
"That was the start of my affair with the Chinese real estate market," Dong said with a smile.
Dong has bought two more apartments. One was for her parents to live in. But the hope for both purchases was to cash in on Shanghai's white-hot market, in which property prices have risen by more than 20 percent a year for the past three years -- 28 percent in 2003. The Shanghai government issued new rules April 26 to rein in mortgage loans and prevent short-term speculators from buying before buildings are even finished.
The Shanghai real estate market, although it affects 16 million people in China's largest city, has been only a small part of the nation's phenomenal economic growth. And the Shanghai government's attempt to put a lid on it was but one instance in a concerted nationwide effort by Chinese authorities to calm the economy before it gets out of control.
Government officials and private economists repeatedly have warned that unless China's economy cools down a little from its growth rate of more than 9 percent a year, it risks inflation, overcapacity and maybe a crash. That could have heavy consequences for an unelected Communist Party government whose acceptance rests largely on the ability to deliver swift and bump-free economic progress to China's 1.3 billion people.
Increasingly, economists warn, too-rapid growth could also be a blow to surrounding Asian nations, including Japan. Such concerns were a backdrop to last weekend's meeting of Asian finance ministers in South Korea, after which China's finance minister, Jin Renquing, said at a news conference that Beijing is "confident" that it can achieve a soft landing for the economy.
In the United States, China is viewed mainly as an exporter but nearby Asian countries have a different perspective. Their economies have come to depend on satisfying China's appetite for imports, particularly raw materials and parts for assembly.
The Commerce Ministry predicted this month that Chinese imports will increase 20 percent in 2004, to $495 billion. Imports from members of the Association of Southeast Asian Nations increased 51.7 percent in 2003, reaching $47.3 billion, the ministry reported. The result was a trade deficit of $16.4 billion with ASEAN's 10 member nations.
The trade relationships with ASEAN countries and Japan are in sharp contrast to its relationship with the United States. Although China's imports from the United States rose by 24.3 percent last year, they still amounted to only $33.8 billion, compared with an increase of 32.2 percent in exports to the U.S. market, worth $92.5 billion.
Seeking to prevent overheating, Premier Wen Jiabao has said his government aims to hold economic growth to about 7 percent this year, after a 9.1 percent performance in 2003 that brought the gross domestic product to $1.41 trillion and, for the first time, boosted per capita GDP above $1,000. The People's Bank of China, the central bank, followed up with a circular in January ordering tighter controls on loans, particularly those that affect the iron and steel, cement and aluminum industries.
Investment in steel, cement and aluminum had risen 96, 122 and 93 percent respectively last year as factories struggled to keep up with construction demands. Despite the talk of calm, it has showed little sign of slowing down. The central bank last week reported investment in steel and cement rose by more than 100 percent in the first three months of 2004 and in aluminum by 39 percent.
Although a dip in commodity prices in recent weeks was heralded as a sign that the restrictive measures may be kicking in, the central bank on April 25 increased reserve requirements from 7 to 7.5 percent -- the third increase since September -- and announced an intention to limit new loans this year to $314 billion, down 13 percent from 2003. Attacking from another angle, Wen said in March that government bonds for infrastructure construction would be reduced by 25 percent this year.
But for people like Dong, the perspective of speedy economic growth has changed little, and their attitude toward investment seems likely to reflect that optimism. China is a huge country, and it needs to build billions of dollars worth of infrastructure to satisfy the population, Dong said.
For example, since 1988 China has moved from its first 12-mile stretch of expressway in a Shanghai suburb to 20,000 miles of such highways nationwide. Plans have been drawn up to more than double the network in six years, continuing the strong demand for cement and other construction materials.
A new passion for cars helps explain why. As incomes rise and a middle class emerges, the once-rare private automobile has become a must. The number of cars made and sold in China increased by 75 percent in 2003, to just under 2 million. Industry analysts have predicted continued growth in car sales of up to 20 percent a year, no matter the restrictions on loans and the rapidly clogging streets.
Riding the trend, Wen made his first stop on a recent European tour at an Audi factory in Germany, where he was photographed smiling behind the wheel of a luxury sedan.
China's romance with cars and the huge market to satisfy also mean even more demand for steel, rubber and other materials, and more construction despite the efforts to moderate capital investment. Foreign automobile manufacturers, a dozen of which already produce here, have announced plans worth billions of dollars.
For Martin Ding, vice president of the Shanghai Real Estate Consultant and Sales Co., the surge in Shanghai property values has fit into a welcome growth in the economy and is not to be feared. As the city's population heads toward a predicted 20 million by 2010, he said, land values are likely to continue to rise, and his workday is likely to continue spilling into the late evening.