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China goes 'green' to cool economy

China goes 'green' to cool economy

China will tighten environmental controls to restrain investment in factories that stoked the nation's fastest annual economic growth since 1995, central bank Deputy Governor Wu Xiaoling said.
"We're going to put forth more effort this year in meeting energy consumption controls," Wu said Thursday in an interview in Davos, Switzerland, where she is attending the annual meeting of the World Economic Forum. The plan would improve air and water quality without fanning inflation, Wu said.
Tougher curbs on polluting factories and energy use would add to two interest-rate increases and restrictions on bank lending that failed to halt an investment boom last year. China's economy grew 10.7 percent in 2006, spurring speculation that the government will take further steps to rein in spending.
An environmental crackdown "would only slow growth marginally," said David Cohen, an economist at Action Economics in Singapore. Cohen said he expects China to raise interest rates twice this year and further boost the amount of deposits banks must set aside as reserves to cool growth.
China last year failed to meet Premier Wen Jiabao's target to reduce the amount of energy used to produce each unit of gross domestic product by 4 percent. Investment in factories, roads and other fixed assets climbed 24.5 percent in 2006, the government said Thursday. Growth in 2005 was 27.2 percent.
The People's Bank of China will raise its benchmark lending rate in the first half, 11 of 14 economists surveyed by Bloomberg News forecast. Data released Thursday showed inflation accelerated to 2.8 percent in December, the fastest in almost two years.
Raising interest rates alone may not be enough to stem price increases, Wu said. "Whether or not we raise rates, we could see inflation," she said. The government will enforce more strictly this year measures aimed at reducing energy consumption, Wu said.
Wu's comments reflect the government's concern at the environmental cost of four years of economic growth of 10 percent or more that has made China the world's fourth-largest economy and the largest energy user after the U.S.
An estimated 70 percent of rivers in the world's most populous nation are polluted by toxins. As many as 300 million of the country's 1.3 billion people have no access to clean drinking water, according to government estimates.
"The government wants to put more teeth into environmental protection," Sijin Cheng, a New York-based analyst at Eurasia Group, a political consulting company, said in a telephone interview yesterday. "They can't afford to apply it so religiously yet across the whole economy, so vigorously that it will bring down entirely economic growth. They want to target specific sectors, specific companies."
The government found 82 projects in 22 provinces with a total investment of 112.3 billion yuan (US$14.4 billion) that failed to comply with rules, the Beijing-based State Environmental Protection Administration said this month.


Updated : 2021-05-17 00:30 GMT+08:00