China's inflation gathers pace

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The Independent Online
CHINA'S booming economy is showing no sign of cooling. The director-general of the State Statistical Bureau said yesterday that the 1994 target of 9 to 10 per cent growth might well be exceeded and that controlling inflation was an important task for the government.

Zhang Sai refused to make predictions for inflation or money supply growth this year. Figures for January showed that prices in the 35 largest cities jumped 23.3 per cent, compared with the same period last year, while national industrial output soared by 33.2 per cent.

China has previously said inflation should not go above 10 per cent overall this year.

The bureau was announcing finalised 1993 economic figures, which showed growth in gross domestic product at 13.4 per cent, the highest since 1985 and the fastest for any country last year. Money supply (M1 and M2) rose 24 per cent.

A Western diplomat said China's 1994 inflation target was 'looking pretty squishy' and that there was a lack of firm money supply targets.

The government has said it will not put up interest rates again, and this has left consumers finding it more attractive to spend their money than save it.

China's austerity package, announced last summer, was abandoned within months when Peking realised the problems that the credit squeeze was causing for the country's loss-making state enterprises. Nearly one- third are in the red, even by Chinese accounting practices.

Mr Zhang said prices should be kept at 'the bearable limit of each household'. He would only enlarge on this to say incomes must rise faster than prices. Some households had suffered a decline in living standards, he said.

He also highlighted the problems caused by infrastructure development failing to keep pace with economic growth. The railways can now only meet 60 per cent of demand for freight travel, one of the reasons that 1994 growth would be lower than for the past two years.

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