MercoPress. South Atlantic News Agency

China can't lower expansion rate

China's economy expanded faster than expected in March 9,5%, increasing pressure on Beijing to continue with efforts to restrain fixed asset investment and possibly hike interest rates.

The expansion rate matches the 2004 nerve breaking pace and is below the government's annual target of 8% in spite of strong restrictions on consumer and business credit. Beijing now admits it needs to curve alarmingly high levels of investment in urban and industrial areas. According to official data released Wednesday fixed asset investment in the first three months of the year went up 22.8% compared with a 43% rate in the same period a year ago.

"The growth rate of 22.8% is still high but the momentum of investment in fixed assets has been restrained" said Mr Zheng Jingping spokesman for the Bureau of Statistics, who stressed Beijing would continue to keep investment levels controlled by monitoring credit growth and improving land use procedures.

China's policymakers and economists have been especially concerned about over-investment in certain urban property markets, although there's disagreement over whether there are risks of a bubble in particular cities.

In the first quarter, investment in real estate was up 26.7%. Mr Zheng estimated that, whereas real estate investment accounted for around 12% of total investment in the late 1990s, it now accounts for about a fifth of the total.

"We should encourage people to buy homes for living and not for speculative purposes", indicated Mr. Zheng who warned about the possibility of property taxes on transaction fees.

Mr. Zheng also admitted shortages and bottlenecks in coal, electricity, petroleum and transport.

However the country's consumer prices adjusted a moderate 2.8% in the first three months of this year. Producer prices for manufactured goods, by contrast, went up 5.6% during this period. Since last year, Beijing has kept a close eye on inflationary pressure since food prices have been raising relatively quickly compared with other goods and services.

In an attempt to cool investment fever Beijing has imposed curbs on bank lending, tightened planning laws and banned new enterprises particularly in the metal industry and property sector.

However the continued rate of expansion was again confirmed last week with the announcement that China had overtaken Japan as the world's third largest exporter after a 35% surge in the country's overseas sales.

But if the Chinese economy keeps growing at the current level the Central Bank could be forced to rise interest rates, following on last October?s hike the first in nine years.