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Central Bank Official Calls for Curbing Investment Overheat

Wu Xiaoling, vice president of the People's Bank of China (PBOC), has called for joint efforts by banks, enterprises and local governments to assist the central bank in implementing its macro-control measures to curb investment overheat.


She warned that all sides have to restrain themselves from intensifying the contradictions to echo these good-hearted and moderate measures, unless the central bank may adopt even harder measures.


The official explained the central bank's decision to increase reservation funds of commercial banks, when she was speaking at the current Boao Forum for Asia 2004 Annual Conference Sunday.


Over the past eight months, the central bank has increased the reservation funds of commercial banks three times, from the previous 6 percent to the current 7.5 percent.


Some local experts said if the central bank measures do not work, it has to take stronger actions including the increase of interests of bank loans, resulting in more powerful impacts on enterprises and the whole economy.


The central bank increased the reservation funds for the first time in the fourth quarter of 2003, forcing the amount of bank loans to decrease to 97.9 billion yuan (about US$11.8 billion), from 230 billion yuan (about US$27.7 billion) in the third quarter of last year.


However, investment in steel industry went up by 172.6 percent in the first two months of this year, while investment in cement industry increased by 133 percent in the same period.


In his opening speech of the forum Sunday, Chinese President Hu Jintao also confirmed the existing of overheat in investment and bank loans, and he said it may bring about negative impacts on China's economy if the problem is not be resolved timely and adequately.


But the president believed that China is sure to maintain a good trend of economic development, by strengthening and improving macro-economic-control and bringing market mechanism into full play.


(Xinhua News Agency April 26, 2004)


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