MercoPress. South Atlantic News Agency

China can't stop growing at a booming pace

Pushed by the booming construction industry the Chinese economy expanded at an unprecedented 11.3% in the second quarter of the year compared to a year ago.

But the Statistics Office in Beijing warned that such a growth rate could spur inflation, (which remained at a modest 1.3% for the frist half of 2006), and scuttle "steady and stable growth".

Beijing is also concerned that the construction boom could lead to a saturation of the supply market and consequently a financial turndown if builders fall behind on payments.

But so far China's growth pace seems immune to contractive measures such as those imposed last April following the 10.3% expansion of the first quarter.

At the time measures were put in place to rein in credit and construction to ensure that growth remains sustainable plus new plans to make it tougher for foreigners to invest in China's property market.

Zheng Jingping, spokesperson for the Statistics Office warned that bank loans must be reined and investment in new factories and buildings limited if China is to maintain a "steady and stable" growth without generating inflation.

"Investment in real estate is excessive and there's too much credit. In the long run they will generate inflation; we must keep close track of prices", said Zheng Jingping.

However economist Stephen Green from Standard Chartered Bank in Shanghai said that in spite of "some serious misbalances" Beijing is very pleased with growth figures since it generates jobs and confidence.

"As long as inflation keeps low, the Chinese economy will keep running at this pace". Compared to 2005 China's exports in the first half of the year grew to 428.6 billion US dollars (up 25.8%) and import 367.1 billion US dollars, (up 21.3%) with a trade surplus of 61.5 billion including 14.5 billion for June alone which may add weight to calls for China to raise the value of the yuan.

According to the new rules foreign firms and individuals are banned from buying homes that they do not intend to live in. They must have lived in China for at least a year before qualifying to buy housing and property under their own name.

China has already banned the building of luxury homes on new land to make affordable property available to poorer families and its central bank is tightening scrutiny on lending to "limit excessive investment and loans growth".