PBOC worries about over-investment
(Xinhua)
Updated: 2004-05-14 09:22

A worried central bank of China said that more firm and substantive measures should be taken to harness the country's widespread over-investment in fixed assets, a conclusion drawn after scrutinizing the nation's fixed assets investment growth in the first quarter.

According to the People's Bank of China's report on monetary policies implementation in the first quarter of 2004, the over-investment has further intensified the imbalance between demand and supply of coal, power, oil, transportation and other items, which the bank believes has brought negative effect on the country's economic structure and pumped up inflation pressure.

"This will also add to the nation's economic risk and likely impose negative impacts on the country's economic and social development," said the report.

From January to March, China's investment in fixed assets soared 43 percent over the same period of 2003 and 15.2 percent faster than the speed of last year, with real assets investment 41 percent over 2003.

A total of 20,000 projects, each costing over 500,000 yuan (US$120,000), broken ground in the first quarter, 31 percent more than in the same period of last year, according to the report, which claims that the planned investment for the quarter reached to 7.2 trillion yuan (US$872 billion) , compared with 2003's total of 16 trillion yuan (US$1.94 trillion).

The report also attributed the over-investment to irrational investment structure and blind and overlapping construction in some industries and regions.

Central investment and local investment in fixed assets had showed sharply different styles, said the report.

Investment in projects handled by the central government rose 4.8 percent, but local ones rocketed 60.2 percent over a year ago, with some provinces even higher than 65 percent, it said.

As a result, long and medium term loans in banks continued to increase. Loans for infrastructure purposes in the first quarter reached 170 billion yuan (US$20.6 billion), 33.7 billion yuan (US$40.8 billion) more than in the same period of 2003.

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