Macroeconomic figures for the first half of this year show that controlling runaway investment has become an urgent task for policy-makers.
According to an August 7 report by the National Development and Reform Commission, the country's 31 provinces and regions all registered a two-digit gross domestic product (GDP) growth rate in the first six months of the year. Investment in seven provinces had grew by more than 40 per cent, and two of them saw their investment growth exceed 50 per cent.
It has become imperative that macroeconomic regulators rein in this dazzling pace of investment growth.
We need first to analyze what factors are behind the rapid GDP growth so that solutions can be found on that basis.
Investment must be backed up by an ample supply of capital. It is obvious that the money supply in the first half of the year has been generous, laying the foundation for the fast growth in fixed asset investment.
On the other hand, given that environmental and resource costs have not been fairly included in the operation of businesses, the return on investment has exploded and investors can pocket huge profits, which in return attracts more investment.
This is the rationale for the investment resurgence in some sectors.
In terms of regulation, the fast investment growth is a result of loose policy implementation.
Some localities have failed to carry out the industrial policies faithfully and to abide by laws and regulations on environmental protection, land management, project approval and production safety.
A recent survey by relevant central departments in some regions shows that about 40 per cent of projects with an investment of more than 100 million yuan (US$12.5 million) have failed to undergo proper procedures for environmental impact assessment, requisitioning of land and project approval.
