CHINA / National

'Forceful measures' urged to prevent economic overheating
Updated: 2006-07-27 13:42

China's premier called for urgent steps to prevent economic overheating, state media reported Thursday, highlighting the increasing concern about keeping the nation's soaring growth from igniting a financial crisis.

"We must take forceful measures to resolve prominent problems to prevent the economy's rapid growth from turning into overheating," Premier Wen Jiabao said Wednesday in a teleconference with officials nationwide, according to news reports.

Wen, China's top economic official, told officials to "resolutely control" an investment boom that drove economic growth in the second quarter to 11.3 percent, its highest rate in a decade, the Communist Party newspaper People's Daily and the official Xinhua News Agency, among others, reported.

Chinese leaders want to keep economic growth high in order to reduce poverty. But they worry that double-digit growth in investment and lending could soar out of control, igniting inflation or leaving banks buried under dangerously high debt.

The government raised interest rates in April to cool off the economy and has imposed limits on construction and bank lending. Economists say another rate hike is possible and have suggested the government might let the country's currency, the yuan, rise in value, which would likely restrain its booming exports.

Wen didn't announce any new initiatives, but called for more vigorous enforcement of restrictions on construction and bank credit - the two factors fueling the current boom.

The premier also called for more efforts to improve life for China's poor by ensuring stable growth of farming and other industries in the countryside, home to some 800 million people.

The Communist Party announced last week that the annual meeting of its Central Committee in October will focus on building a "harmonious country" - a reference to efforts to ease tensions over the growing wealth gap between regions and social classes.

Meanwhile, in a new measure to rein in real estate speculation, the government said it will impose a capital gains tax of 1 to 3 percent on August 1 on resales of residential property.

The announcement on the Web site of the government tax agency didn't give details of how the tax would be applied. China already charges a 5 percent tax on property sold after less than five years of ownership.


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