China worried about its hyperactive economy

Alisa Roth Apr 5, 2007
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China worried about its hyperactive economy

Alisa Roth Apr 5, 2007
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KAI RYSSDAL: Beijing’s been saying for a while now that too much economic growth isn’t necessarily a good thing. The Chinese economy has been booming for years — annual increases in GDP growth above 10 percent. And the government’s doing all it can to slow things down. For the sixth time in less than a year, regulators have told banks they need to hang on to more reserves. That is, take money out of the market. Marketplace’s Alisa Roth has more now from New York.


ALISA ROTH: Chinese officials think the economy grew a whopping 11 percent in the first quarter. That’s well above the government’s goal of 8 percent.

China worries unchecked growth could set off a crash like the one that hit Japan, Taiwan and other Asian countries in the mid-1990s.

Barry Eichengreen is a professor of economics at UC Berkeley. He doubts today’s move will help. He says China’s developing very fast and there are many other ways of getting money to invest.

BARRY EICHENGREEN: So the traditional device of instructing the banks not to lend or requiring them to hold more cash as reserves simply will no longer work.

China’s tried other tactics to cool off the economy. Last month, it raised interest rates to the highest level in eight years. And it’s also tried to prohibit lending to certain sectors, such as construction.

William Overholt heads the Rand Center for Asia Pacific Policy. He says China still has one more trick it could try.

WILLIAM OVERHOLT: The other thing they could do is float their currency. And that would have a lot more impact, but they’re still worried about the effect that will have on the banks and on some of their weaker exporters.

Overholt says China’s not the only one who should be worried about its hyperactive economy. If it were to crash, he says, the impact would be felt around the world.

In New York, I’m Alisa Roth for Marketplace.

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