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China should hold off on new steps to cool rapid economic growth, and ought to consider replacing tough administrative measures with market-oriented ones, a central bank adviser was quoted Wednesday as saying.
"It is still unclear how the economic situation will evolve following economic controls and market adjustments, we need time to watch it closely," the People's Daily quoted Li Yang, a member of the central bank's monetary policy committee, as saying.
"At this time, the safest thing to do is to hold off on issuing major financial control measures," Li was quoted as saying in a report on the paper's Web site.
Li said government edicts could have unwanted side effects.
"Administrative measures are like giving out a strong dose of medicine, which is quick to see its effectiveness but can easily lead to error and harm," Li said.
He likened market-based measures to Chinese medicine that could be slow to show results but would eventually cure an ailment with few side effects.
Worried that an investment bubble could turn economic boom to bust, the Central Government has taken a raft of steps such as forcing banks to hold more money instead of lending it out, and ordering a halt to new projects in areas like steel and property.
China's weaker-than-expected economic growth of 9.7 percent in the year through the second quarter lifted hopes that the measures would bring about a soft landing and have cooled expectations of an imminent interest rate increase.
China's consumer prices rose 5 percent in the year through June, but they fell 0.7 percent in June from May, suggesting the central bank may not have to resort to an interest rate rise, which would be its first in nine years.
Central bank officials said earlier this year that China may need to raise rates if inflation hit 5 percent.
Qiu Xiaohua, deputy commissioner of the National Bureau of Statistics, was quoted Tuesday as warning that measures to rein in the economy were causing financing trouble for many companies and have failed to ease a worsening energy crunch.
New loans in the first half of 2004 totaled 1.43 trillion yuan (US$173 billion), down 350 billion yuan from a year earlier. Much of the drop came in June, when banks lent 240 billion yuan less than a year earlier, central bank data showed last week.
(Shenzhen Daily July 22, 2004)
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