China's Wen warns lending, investment growing too fast
Posted: 16 March 2007 1455 hrs

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BEIJING: Chinese Premier Wen Jiabao warned Friday that lending and investment were growing too fast, urging more be done to boost consumer spending.

"Now we have an excessively high investment ratio and we have excessively large extension of credit and excessive liquidity in the market," Wen told a press briefing at the end of parliament's annual full session.

He said China's current economic growth relied too heavily on investment. "This is not sustainable," he said.

Shortly before Wen spoke, China announced investment in urban infrastructure rose 23.4 per cent in the first two months of the year from the same period in 2006, when the rise was 26.6 per cent.

For all of 2006, fixed asset investment, a major driver for the economy, increased 24 per cent.

Banks lent a total of 980 billion yuan in the first two months of this year, a rise of 36.8 per cent, data published earlier this week showed.

Wen said, however, that the Chinese economy, which expanded by 10.7 per cent last year, was able to maintain its current growth momentum.

"The conditions are there. The most important factor is that we have a peaceful international environment to concentrate on economic development," he said.

"We also have huge potential in terms of domestic market demand ... in the future we will continue to boost domestic demand, particularly domestic consumption demand."

Chinese retail sales rose 14.7 per cent in the first two months of 2007 compared with a year earlier, the government said earlier this week.

While retail sales are growing very fast compared with most countries' standards, Chinese economists frequently complain that they could be even higher still in order to reduce the role exports play in driving the economy.

Consumers are often reluctant to spend freely because of the crumbling of the Chinese welfare state, forcing many people to save extra amounts of money for rainy days and basics such as education and health care. - AFP/yy