More to be done to cool down economy
By Yi Xianrong (China Daily)Updated: 2006-11-16 14:22
When businesses and individuals can make choices according to their estimates about the market, resources can be allocated efficiently because they have to shoulder all the consequences of the decision. Businesses in regions where the market economy is better developed, like Guangdong, Zhejiang and Jiangsu provinces, are able to invest based on market information.
It is not the case when the economy is under the control of government.
The fervent growth of fixed-assets investment in recent years is the result of governmental control over the economy.
The control is especially strong in the inner regions of the country. The provinces with rocketing fixed-assets investment were Jilin Province in Northeast China, Anhui Province in East China and Henan Province in Central China, each of which achieved a growth rate of between 45 per cent and 50 per cent.
Because of strong governmental control over the economy, figures indicating a cool-down may not give us the full picture.
As long as local governments continue to keep a tight grip on the economy, it will be easy for them to manipulate it. Local governments can reduce or promote investment by issuing or not issuing licences to projects.
Therefore, the ups and downs in the economic performance indexes are probably an outcome of such manipulation according to current targets of the central government's macro-control policies.
In other words, the changes in the latest statistics, fitting well into the
decision-makers' expectations, are probably only temporary. As soon as the
central government eases its strict macro-control policies, the economy will
likely regain its heat.
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