Tags: china | fast | economic | growth | problem

China Bank Chief: Speedy Economic Growth 'Very Problematic'

Tuesday, 13 Apr 2010 09:52 AM

By Dan Weil

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China’s own establishment is now joining the chorus of experts inside and outside the country who are concerned about excessive economic growth.

Guo Shuqing, chairman of China Construction Bank, the country's second largest by assets, told the Financial Times that GDP growth of 9.5 percent or more would be "very problematic."

He said "it will mean more duplication of construction, more excess capacity and higher waste of capital."

China’s economic growth registered 10.7 percent in the fourth quarter, a three-year high. The World Bank forecasts an expansion of 9.5 percent for this year, but many other experts see a faster rate.

The loan frenzy that arose out of China’s $586 billion stimulus package last year will come home to roost, Guo says.

With encouragement from the government, banks made $1.4 trillion of loans last year, doubling the total of 2008.

"We have some problems with oversupply of money, and liquidity increased dramatically,” Guo said. “We are definitely going to pay some costs for that in the form of asset bubbles or rising inflation."

The import boom created by China’s surging growth is "unhealthy and unsustainable" and risks a jump in commodity prices worldwide, Guo says.

Others share the same concerns, especially about the lending spree.

“It's beggars belief that lending could have expanded so rapidly without some decline in underwriting standards,” Edward Chancellor of money manager GMO told Australia’s Business Spectator.

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