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Overheating economy may lead to inflation
Updated: 2005-05-23 10:18

A senior economist with the Beijing office of the Asian Development Bank (ADB) said that the current growth rate of China's economy and its fixed asset investment may lead to inflation and other risks.

Zhuang Jian was quoted by the China News Service as saying that this year is key to the stable and sustainable development of China's economy and macro-control policy should continue to cool down the economy.

China's first quarter gross domestic product (GDP) grew 9.5 percent year-on-year, and without further control measures, the year's GDP growth rate will probably exceed 9 percent, he said.

"The continuous three-year GDP rate over 9 percent will lead toa 5-plus percent rise in consumer price index (CPI), which most residents cannot bear," he said.

Currently Chinese enterprises and local governments are still very eager to invest, and the inflation pressure is enormous, he said.

The fixed asset investment in China's urban areas went up by 25.7 percent year-on-year in the first four months this year, according to China's National Bureau of Statistics.

The government should increase its support for agriculture and improve the market environment to stimulate consumption. This will boost the development of agriculture and services industries and balance the relationship between investment and consumption, Zhuang said.

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