China's economy is on target to grow by 9.5 per cent this year, significantly ahead of the official 8 per cent target, the country's vice-finance minister said this weekend. Li Yong conceded that the government was now considering a second increase in interest rates this year, in order to bring growth under control.
"I think in the future we will make interest rate adjustments if necessary, but we should not make abrupt adjustments," Mr Li said at the annual meeting of the Asian Development Bank. He said that while an investment and exports boom was driving the economy, "because there could be more tightening policies, growth of 8 to 9 per cent is also likely".
China raised interest rates last month for the first time since October 2004, after announcing that economic growth in the first quarter of the year was 10.2 per cent. However, analysts now believe further rate increases are imminent following assurances last month that the government was conscious of social and environmental difficulties being caused by excessive growth.
Joseph Tan, an economist at Standard Chartered, said: "China isn't slowing down any time soon - the hike was clearly an attempt to slow things down but this will not be the last interest rate hike we will see."
Mr Li said that in addition to restraining economic growth, the government was increasingly anxious to tackle its trade surplus, which has been a mounting concern in the European Union and the US. "We try to achieve a balance between imports and exports," he said.
American politicians, in particular, complain that the Chinese have kept the value of the country's currency, the yuan, artificially low, in order to boost exports. Although the Chinese dropped the yuan's peg to the dollar last year, it has since appreciated by only a little over 3 per cent.