China likely to boost measures to curb growth

China's economic planners seemed set yesterday to take more potent measures to slow the booming economy, as the government reported the key inflation indicator at 5.3 percent last month.

Industrial output and inflation have remained strong, despite administrative controls on lending, investment and land transfers, Vice Premier Zeng Peiyan (曾培炎) was quoted by state media as saying.

Yesterday, the government reported the consumer price index at 5.3 percent last month, the same rate of increase as in July. That was slightly below economists' forecasts of 5.4 percent.

Industrial output jumped 16 percent last month, up from a 15.5 percent year-on-year increase in July, according to data reported earlier. The increase was fueled by strong demand for coal, steel, natural gas and high-tech products, the government said.

"The success of the government's cooling down policies now seems doubtful," the state-run Xinhua News Agency said in a report on its Web site.

China's economy grew at a rate of 9.7 percent in the first half of the year, well above the official full-year target of 7 percent.

Chinese leaders worry that the booming growth could ignite inflation and lead to financial problems. They have tightened bank lending and ordered a nationwide review of major construction in an attempt to rein in speculative investment in factories and other assets that they say is fueling inflation.

Top officials have stressed the need for local authorities to heed orders to slow investment in construction and factory equipment, amid signs of a resurgence in spending. But it is unclear what exact measures they might be planning to drive the point home.

People's Bank of China Governor Zhou Xiaochuan (周小川) has fended off speculation that the central bank will raise interest rates to help curb investment. It would be the first rate hike in nine years.

Measures taken so far have kept growth strong and stable, Zeng told the World Economic Forum business conference in Beijing, Xinhua reported.

"But we have to note that the results are only initial. We should further implement the measures," Xinhua cited Zeng as saying.

China recorded a 9.1 percent year-on-year increase in gross domestic product in 2003, surpassing 8 percent growth in 2002.