China faces the risk of a rebound in fixed-asset investment and needs to guard against a pick-up in industrial production, which could undermine economic stability, the top planning agency said on Thursday.
Zhu Hongren, an official in the powerful National Development and Reform Commission (NDRC), said an acceleration in annual factory output growth, to 18.3 percent in the first quarter, could point to a range of economic challenges.
"If industrial production keeps expanding, it will not only accelerate economic growth, lead to over-consumption of resources and energy and increase emissions of pollutants, but also make it more difficult to adjust the economic structure," said Zhu, vice head of the NDRC's economic operation department. That would "put pressure on economic stability and therefore lead to possible big swings in the economy," Zhu told a news conference. He said industrial output could pick up further this quarter, putting pressure on the supply of coal, power and oil products and possibly resulting in distribution bottlenecks.
Still, Zhu said that overall, indicators for the first quarter, when gross domestic product expanded 11.1 percent from a year earlier, did not suggest that the economy was overheating.
The NDRC said China would take further steps to curb exports of energy-intensive products, which added to what it called acute challenges in reducing pollution and conserving energy. Jia Yinsong, another vice head of Zhu's department, told the same news conference that exports of steel products, charcoal and iron alloy were still growing too quickly.
Moves to trim such exports would include further cuts to export tax rebates, as well as stricter criteria in approving new projects and forcing polluting companies to pay higher prices for power and water, Jia said.
Overall production of some energy-intensive products, including aluminium, alumina, iron alloy, charcoal and cement, was also growing too quickly, Jia said, with the risk of a rebound in investment, especially in aluminium and cement.
Jia said Beijing's efforts to rein in misguided spending had achieved initial success but some local governments continued to flout the rules by offering incentives to attract investment in sectors that are energy-intensive and pollute a lot.
The central government would force them to stop, he said. In a toughly worded editorial, the official Xinhua news agency said errant officials would be punished and those who missed pollution and energy targets would be denied promotion. The greatest difficulty China faced in saving energy and cutting emissions was that the central government's orders were being ignored, Xinhua said. Beijing would use an array of economic, legal and administrative powers to tackle the problem "with great determination", it added.
Among other measures, Beijing has raised interest rates and tightened requirements for construction to curb investment and keep the world's fourth-largest economy on an even keel. Investment in fixed-assets such as factories and roads grew 23.7 percent from a year earlier in the first quarter, after a 24 percent increase in all of 2006.
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