View Full Version : China May Grow 9.5% in 2006, Beating Govt Target

May 8, 2006, 09:03
China May Grow 9.5% in 2006, Beating Govt Target (Update3)

May 6 (Bloomberg) -- China's economy may expand 9.5 percent in 2006, ahead of target, indicating the government must do more to cool an investment boom driving down prices for metal and real estate, Vice Finance Minister Li Yong said.

``We have to control investment among local governments,'' Li said today at the Asian Development Bank's annual meeting in Hyderabad, India. The government needs to step up efforts to slow investment in steel, aluminum and real estate because prices of products in these industries are ``going down.''

China's surging investment may lead to excess production capacity and bad loans, increasing the risk of a sudden economic slowdown, according to the World Bank. Investment in factories and roads in urban areas rose 29.8 percent in the first quarter from a year earlier. China's may raise its key lending rate again, after increasing it for the first time since October 2004, Li said.

``China's faster-than-expected, first quarter GDP growth of 10.2 percent will likely mean faster overall 2006 GDP growth, though our base case scenario of growth moderation remains,'' Citigroup economists wrote in an April 28 report, in which they increased their forecast to 9.3 percent from 8.7 percent.

The central bank increased its one-year lending rate by 0.27 percentage point on April 27. It left deposit rates unchanged to spur consumer spending. China's official growth forecast for this year is 8 percent, according to an Oct. 29 commerce ministry report.

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