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Anticipation Grows Over Chinese Economic Plans

China says Premier Wen Jiabao is planning steps to slow the country's red-hot economy without hurting it. Joseph Popiolkowski reports from VOA's Asia News Center in Hong Kong that the announcement is fueling speculation by investors about what form these measures will take.

China's official news agency reports that Mr. Wen promised to moderately tighten monetary policies soon to ensure stable growth.

China's economy is booming. Government statistics released Thursday show that industrial output expanded 18 percent in May compared with the same period a year ago.

But China's runaway growth has been accompanied by a large trade surplus, rising inflation and a surge in energy use.

Officials have raised interest rates four times in 14 months to slow growth, but those moves have proved ineffective. Last month, the government tripled the stamp tax on stock market transactions. That prompted selling for a few days, but the market has since rebounded.

One expert says high corporate profits and a successful sale by the government of some of its stock market holdings pumped up investor confidence.

Stephen Green, a Shanghai-based senior economist at Standard Chartered Bank, says the weak effort by the government to cool the economy has been unable to damp such confidence.

"Against those huge structural positives for the market, the few and slight measures we've seen so far isn't half enough," he said.

Green expects another interest rate increase this year.

Green says the government is right to act now to head off inflationary pressure, which could be brought on by wage increases, higher raw material costs, higher taxes, and a more expensive currency.

"Over the next two, three years out you're going to see a lot more inflationary pressures coming out of China in terms of its exports, which is going to mean higher prices for electronics goods on High Street in London and New York, for clothes, toys and for all the other stuff China is beginning to export, things like auto parts for instance," said Green.

If these corrective measures fail to tone down China's economy, Green says he expects the government to conduct more investigations into illegal share trading, introduce more taxes and raise interest rates again.