http://online.wsj.com/public/article/SB115582157779038279-cNfqsjzcEVGjqnIYOdX4wn83u1E_20060824.html?mod=regionallinks
BEIJING -- China, in what the government said was an unprecedented move, has
punished three provincial officials for ignoring the central government's call
to slow down investment.
The action highlights the difficulty Beijing faces in trying to control the
growth of its runaway economy. The authority of the central government is being
limited by provincial and regional officials who approve projects to stimulate
economic growth, which has traditionally been a key measure of officials'
performance. Beijing has been trying to put the brakes on the economy because of
fears that overheated investment could lead to inflation and a pileup of bad
loans.
The governor of Inner Mongolia and his two lieutenants were told to write
self-criticisms to China's powerful State Council for allowing hundreds of
millions of dollars of investments in coal-burning power plants that hadn't been
authorized by the central government. It wasn't clear whether the officials will
face further punishment. Such a highly public dressing-down is unusual in China,
and it appears the government is trying to send a message that it is serious
about its economic policy.
A surge in construction of coal-burning plants in Inner Mongolia, in northern
China just south of Mongolia, is blamed for high pollution levels that often
leave the air in the region dark with soot. But the plants have helped
contribute to soaring growth rates in the region that reached 21.6% last year,
far surpassing even China's torrid growth nationally of 11.3% in the most recent
quarter.
The case has also drawn particular attention because six workers were killed
when part of a plant collapsed in July 2005 as builders raced to finish the
project, despite orders from Beijing to stop construction.
China's central government has taken a slew of measures this year to slow the
economy. It raised bank interest rates once, and twice increased bank reserve
requirements -- the amount of money commercial banks must deposit with the
central bank and which then isn't available to be lent out. Authorities also
increased taxes on profits from property sales and raised the minimum deposit
for home purchases to try to cool overheated real-estate prices.
So far, those policies are having limited effect. Economic growth has
accelerated to its fastest pace in more than a decade, with gross domestic
product in the second quarter expanding 11.3% from the same period in 2005,
faster than the 10.3% growth recorded in the first three months of this year.
On Wednesday, in a special meeting of China's cabinet led by Premier Wen
Jiabao, Inner Mongolia leader Yang Jing and his subordinates Yue Fuhong and Zhao
Shuanglian were strongly reprimanded, according to state-run-media reports.
Others involved in last year's fatal accident have been demoted and two face
criminal charges, the reports said.
"Anyone who disobeys orders will be held accountable," said a statement from
the meeting, according to China Daily.
Since severe power shortages hit large parts of China's coastal industrial
and commercial base two years ago, construction of coal-fired power plants has
surged. Many projects have permission from the central government, but there has
also been a building boom in illegal power plants that avoided Beijing's
scrutiny on efficiency, safety and environmental standards.
By the end of 2004, unauthorized power plants with a potential capacity of
122 gigawatts were either finished or under construction, according to China's
National Development and Reform Commission. That is more electricity than is
used by the entire U.K. and is roughly one-fifth of China's total installed
power capacity. Analysts say even more unauthorized construction has begun since
then.
An investigation by China's cabinet found that Inner Mongolia's government
had illegally approved the building of 8.6 gigawatts-worth of power stations.
The coal-rich province attracted energy-intensive industries such as chemicals.
Inner Mongolia's economy boomed. In 2002, the economy expanded 12.1%. Last year,
it grew 21.6%.
The growth has come at a high cost. Already plagued by sandstorms that also
cover Beijing, Inner Mongolia has experienced worsening air pollution and acid
rain. Water, already scarce in the arid region bordering the Gobi desert, is now
in even shorter supply, said Han Xiaoping, an analyst with Beijing Falcon
Pioneer Energy Co.
The deaths occurred last year when one of the buildings for a generator at
the $366 million Xinfeng Power Plant collapsed after orders to speed up
construction.
