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China's Surging Economy Raises Concerns


China's economy grew by nearly 11 percent in the first half of this year, raising concerns about the sustainability of its growth. A Chinese official says growth is stable, but there are warnings the government must restrain bank lending and investment to avoid igniting inflation.

China's economy grew by 11.3 percent in the second quarter of this year, despite government efforts to rein in money supply and excessive investment. For the first six months of the year, growth hit 10.9 percent, well above the official target of eight percent for the year.

The second-quarter growth rate is the fastest in a decade and raises concerns about its sustainability.

The Asian Development Bank predicts average growth for Asia will be 7.5 percent this year, but warned China about overheating.

Masahiro Kawai is head of the non-profit lender's office of regional economic integration. He warned that China's efforts to tighten monetary policy - modest interest rate rises and restrictions on lending, are not being felt.

"It is in the best interest for everybody to see China's sustained, stable growth rate and the current growth rate's a bit higher than (a) sustainable growth rate," he said. "The current monetary policy tightening appears to be insufficient."

There is a risk that overheated growth will lead to inflation and risky borrowing to build too many factories, office buildings, and homes. That can lead to financial instability and social problems.

Kawai and other experts say China should slow growth and reduce risks by raising interest rates and bank reserve requirements, and allowing the Chinese currency, the yuan, to appreciate.

Economists say making bank loans more expensive would also lead to more efficient investment and less risky borrowing.

Zheng Jingping is a spokesman for China's National Bureau of Statistics. He said Tuesday there are no immediate plans to raise interest rates or let the currency rapidly appreciate. He said China could sustain its rapid growth. But he warned that consumer prices are likely to increase and the government must be on guard against inflation.

"In fact, the increased investment in fixed assets is too fast, monetary investment is excessive. So, in the long term, this will always lead to inflation. China is no exception. So, we need to watch out for price increases," he said.

This year's growth has been seen in most sectors of the economy - with exports rising 25 percent and investment in roads, buildings and other fixed assets grew nearly 30 percent.

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