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China Admits Economy
Faces Serious Problems
The rapid expansion of investments and inflation are
among the top problems facing China¡¯s economy,
according to the Economic Development Revolution
Committee. The revelations came in a recent Beijing
Economy Daily article. Other problems outlined in the
article include the number of large loans and a
shortage of coal.
The article points out that as the Mainland China
economy grows rapidly, some serious issues have not
been effectively resolved and others are still
developing.
Investments have expanded extraordinarily fast. In the
first quarter of the year, the ratio of social
investments to capital assets increased 43 percent,
and the amount of investments increased 15.2 percent.
The growing trend of blind investment by industries
has not been curbed. Real estate speculation also
continues to grow rapidly, while local investment,
especially in coastal areas is booming. Investments in
Eastern areas increased 47.8 percent, making up 64.2
percent of investments nationwide.
Secondly, loan size is still relatively large. At the
end of March, loans approved by Guangyi Money Supply
increased 19.2 percent, which is a 0.7 percent
increase from the same term last year. In the first
quarter, loans from financial institutions increased
83.4 trillion yuan, which changed the downward trend
since the fourth quarter of last year, in which there
was only a 23.8 billion yuan increase. Foreign
exchange loans have continuously and rapidly increased.
In the first quarter, new loans reached 9.4 billion
U.S. dollars, which is an increase of 4.2 billion U.S.
dollars over last year.
There are also shortages of coal and electricity
generated from coal. During the first quarter,
electrical power production increased 15.7 percent,
yet generation equipment was continually overloaded.
The rate of coal-generated electricity used per hour
has reached higher levels than all past years, even
though there are still 17 provinces where electricity
usage is limited, and Eastern and Southern China
seriously lack electricity. In the first quarter,
production of coal increased 14.4 percent, but still
could not keep pace with the growing demand.
Finally, pressure from inflation has increased. The
general price of goods increased 2.8 percent last year.
Food prices went up 4 percent. Moreover, the
international market has increased the domestic
production cost of products like mint, aluminum and
cotton.
Among the measures that can be undertaken to address
the economic problems are stricter control of new
industrial projects and using a different monetary
policy to strengthen loan administration and
effectively control the increase of loans.
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