CHINA UP AND AWAY

 
Editorial
Friday, April 20, 2007
 
 
China'seconomy is going up like a hot air balloon on a cold day. Higher interest rates are probably needed to slow it down, but the greater problem is China's focus on investment and exports at the expense of consumption. The Chinese authorities should seize on this period of strong growth as an opportunity to rebalance the economy.

Growth accelerated to 11.1 per cent year-on-year in the first quarter, above expectations and almost its fastest rate in a decade. Investment in fixed assets was up 23.7 per cent; exports were up 27.8 per cent; and retail sales rose by 14.9 per cent. Those are big numbers.

Some of the other rising economic numbers are a bit more worrying. Inflation was 3.3 per cent in March and the stock market has risen almost 30 per cent in the year to date. China's foreign exchange reserves, which the central bank accumulates to limit the appreciation of the renminbi, are soaring.


When Chinese growth rose to 12-14 per cent in the early 1990s there was a surge in inflation. The speed limit probably remains about the same and yesterday's data suggest the People's Bank of China will have to raise interest rates further. Beijing may also use some of its “administrative measures” – a bland euphemism for diktats to banks and industry that prohibit some investments, such as new steel mills.

But the short-term problem of slowing growth to about 10 per cent is not the real issue. China's economy is like a great river in flood: it has an unstoppable momentum. Government policy, however, is channelling that power in ways that may cause problems.

China's low exchange rate encourages production for export rather than domestic consumption and diverts investment into projects that may prove pointless or unproductive. Low deposit rates and capital controls force money into the domestic share and property markets creating the risk of asset price bubbles and more wasted investment. The value of foreign exchange reserves, meanwhile, will fall if and when the renminbi goes up.

China does, therefore, need to do more to rebalance its economy and now is a good time to do so. There are signs that China will allow its citizens to buy foreign assets, which would be a sensible way to relieve pressure on domestic assets and on the currency. But given the strength of the world economy, China should seize its chance to make bigger reforms, including more freedom for the renminbi to rise.

China's fundamentals are so strong that little can slow its growth. There is no shortage of demand: strong global growth will boost exports, while domestic consumption is rising, even if not quite as fast as it could. Nor is there a shortage of supply, as China still has a vast pool of underemployed rural workers and an abundance of cheap investment capital. Foreign investors should tread carefully in China's bubbly asset markets, but there is no question about the economy's underlying strength.

中国应重新平衡经济

 
英国《金融时报》社论
2007年4月20日 星期五
 
 
中国经济的迅猛增长，就像大冷天里释放了一个热气球。要让它的上升速度慢下来，提高利率也许是必需的。但更大的问题在于中国“轻消费、重投资、重出口”的做法。中国当局应该抓住当前经济强劲增长的机遇，重新平衡经济。

今年第一季度，中国经济较上年增长11.1%，这个数字不仅超出了人们预期，而且几乎是十年来的最快速度。固定资产投资提高了23.7%；出口增加了27.8%；零售额提高了14.9%。这些都是很大的增幅。

其它一些日益提高的经济数据更令人担忧。3月份的通胀率为3.3%；今年迄今为止，股市已经上涨近30%。中国外汇储备正在激增——为了限制人民币升值，中国央行积累了大量外汇储备。

当中国的经济增速在上世纪90年代初升至12%到14%时，也同时出现了高通胀。GDP增速上限也许还在这个水平，而昨天的数据表明，中国人民银行(PBoC)将不得不进一步提高利率。中国政府也许还会利用某些“行政手段”——这是一种温和的委婉说法，指的是政府勒令银行和相关行业禁止某些投资，如建设新的钢铁厂。

不过，短期内把GDP增幅放缓到10%左右，这并不是真正的问题。中国经济就像一条洪汛来临的大江，有着不可阻挡的势头。然而，为了疏导这种力量，中国政府的政策可能引发新的问题。

中国较低的汇率鼓励了出口生产，而非国内消费，同时又把投资引向那些最终可能毫无意义或徒劳无功的项目上。低存款利率和资本控制，迫使资金进入了国内股票和房地产市场，产生了资产价格泡沫和更多无用投资的风险。与此同时，如果人民币升值，外汇储备的价值就会应声而落。

因此，中国确实需要采取更多措施来重新平衡经济，而现在正当其时。有迹象表明，中国将允许国民购买外国资产，这将是减轻国内资产价格上升压力和人民币升值压力的一种明智方法。不过，考虑到全球经济的强势，中国应该抓住机遇进行更大的改革，包括让人民币更自由地升值。

中国的基础如此坚实，没有什么能减缓它的增长。这里没有需求短缺：强劲的全球经济增长将推高出口；而国内消费即便没有达到应有的增长速度，但终究是在增长。这里也没有供应不足，因为中国仍然有大量没有充分就业的农民工，以及充裕的廉价投资资本。外国投资者应该在中国充满泡沫的资产市场小心行走，但中国经济的潜在实力无庸置疑。