The chairman of China Construction Bank, the country’s second largest by assets, has warned of the perils of rapid growth, adding his voice to a growing chorus of economists concerned about overheating.
GDP growth of 9.5 per cent or above would “be very problematic”, Guo Shuqing told the Financial Times. “It will mean more duplication of construction, more excess capacity and higher waste of capital.”
In its latest estimate, the World Bank has predicted a growth rate of 9.5 per cent for 2010, but many analysts predict even faster expansion of the Chinese economy this year.
Growth in the first quarter alone is estimated at between 11 and 12 per cent.
Mr Guo’s warning comes at a time when China has been sucking up imports from the rest of the world at an accelerating rate and growth in imports has exceeded the pace of exports for most of the last year.
But China’s trading partners, particularly the US, fear that its policy of holding down its exchange rate relative to the dollar is driving overseas demand for its exports which, in turn, is fuelling rapid economic expansion and inflation.
At the weekend, the US Treasury decided to postpone a report due on April 15 on exchange rates, a move that allows the Obama administration to avoid for now the delicate question of whether to label China a currency “manipulator”.
Mr Guo said there would be a price to pay for the flood of new state-directed bank lending that made up the bulk of China’s economic stimulus package last year, when banks extended Rmb9,600bn ($1,400bn) in new loans – double the amount lent a year earlier.
“We have some problems with oversupply of money and liquidity increased dramatically and we are definitely going to pay some costs for that in the form of asset bubbles or rising inflation,” Mr Guo said.
Mr Guo said he was concerned the rapid increase in imports to China was “unhealthy and unsustainable” and risked raising commodities prices worldwide, which would in turn hurt developing countries.
Tim Geithner, US Treasury secretary, cited over the weekend a spate of high-level meetings between China and the US over the next three months as a reason to delay any move to label China a currency manipulator.
Chinese president Hu Jintao is due to attend a summit on nuclear security in Washington on April 12-13. Mr Geithner said there were meetings planned during which he aimed to make “material progress”.
Lawrence Summers, White House economic adviser, said yesterday: “There are clearly crucial issues with respect to commercial practices in a number of countries, including China.”