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China's Economy Growing Fast, Despite Efforts to Prevent Overheating  - 2004-10-22

China's economic boom continues, despite the government's efforts to prevent fast growth. Officials on Friday reported that gross domestic output in the third quarter rose 9.1 percent.

China's leaders have been trying to gently slow the economy, which has been growing at a breakneck pace for the past few years. Friday's figures from the National Statistics Bureau indicate the growth is showing few signs of significant cooling.

In July, August and September, gross domestic product grew 9.1 percent, compared with the same period a year ago. For the first nine months of the year, growth equaled 9.5 percent. That is well above the government's earlier target of seven percent growth for this year, but down from last year's rate of more than 10 percent.

The government is worried that soaring growth could trigger massive inflation, and prompt banks to lend recklessly, which could destabilize the financial system. To head off problems, officials over the past year have tightened the rules on lending and taken other measures, such as curbing investment in real estate and steel production.

In presenting the economic report, National Statistics Bureau spokesman Zheng Jingping said that, while the measures have yielded some results, more needs to be done.

"Though some of the prominent problems existing in economic life have been alleviated, the bases are still weak," he said. "The incentive of excess investment is still there."

Retail sales, industrial output and inflation also were all higher in the third quarter of the year.

The continuing rapid growth this year happened despite an energy crunch, as the expanding economy demands more electricity than China's power plants can produce or distribute.

Mr. Zheng says new measures to prevent overheating are necessary.

"We should further enhance and expand the achievements of macro-control to guard against the rebound of those problems.," said Zheng Jingping.

However, economist Tim Condon at ING Bank in Singapore, says it appears the government's controls are beginning to work, especially in more active sectors, such as steel production and automobile manufacturing.

"The data should allay concerns that the government had earlier about economic overheating," said Tim Condon.

Mr. Condon and others on Friday said they think it is time for the government to scale back the tightening measures.

However, others were more cautions, saying the growth rate is still far too fast to begin relaxing measures.