Fixed asset investment may expand

Updated: 2006-11-05 09:11

China's fixed asset investment is still under potential pressure of further expansion despite controls imposed this year, says a senior official with China's central bank.

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Su Ning, deputy governor of the People's Bank of China (PBOC), told the 10th Annual CEO Forum sponsored by Business Week that the pressure of further expansion came from the strong investment incentives of local governments and the reinvestment of company profits.

Su said China's macro economy was operating with slight fluctuations and predicted it would develop rapidly and steadily in a long term.

The central bank would continue to carry out stable and healthy monetary policies to put the growth of loans within a reasonable level and to enhance the adjustment of loan structure, he said.

PBOC figures show China saw a slower growth in loans in September. However, long-term loans increased by 708.6 billion yuan (US$88.575 billion) from May to August.

The central bank raised the one-year and one-to-three-year loan rate by 0.27 percentage points on August 17. The three-to-five-year loan rate was raised by 0.36 percentage points and the rate for five years by 0.45 percentage points.

Raising the rate for long-term loans by a larger margin than that of short-term loans would help to curb demand for long-term loans and the expansion of fixed assets investment, central bank officials have said.

Measures to tighten controls on the financial and monetary sector had already been taken and the effects would be felt later, said Su.

He emphasized that the enlargement of domestic demand was one of the fundamental ways to solve the economic imbalance.

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