CHINA PLANS TO REIN IN ITS CONSTRUCTION INDUSTRY

CHINA PLANS TO REIN IN ITS CONSTRUCTION INDUSTRY

Construction projects in China, among the fastest-growing sectors of the economy, will be reviewed and probably trimmed as part of moves to corral spending.

The State Planning Commission has ordered all local authorities to examine and trim construction proj- ects so limited resources can be channeled to more

worthwhile purposes.Documents obtained by The Journal of Commerce indicate the commission is requiring provinces and municipalities to review any current or planned project worth more than 10 million yuan (US$1.75 million), which suggests the extent of the paring.

It also ordered local governments to start no new construction proj- ects.

The readjustment is necessitated by "the imbalance between key infrastructure projects and (money) poured into property, stocks and nonessential schemes," the papers said.

Huge sums have been diverted from infrastructure development to speculative uses, one reason for the nation's runaway economic growth.

The commission, responsible for mapping out the state investment program for key projects, said investment in such priorities as raw materials, energy, transport and telecommunications will be guaranteed. Less-important projects - mostly processing plants consuming materials - "may be suspended."

Development zones and real estate projects "will be strictly controlled for a certain period," the commission said.

More than 4,700 new projects were launched across China last month, 1,428 fewer than the same month a year ago, government statistics show.

Zhu Rongji, China's economic czar, issued a 16-point plan last July to cool off the economy. It included brusque orders to banks to claw back loans used for unauthorized purposes.

Earlier this month, the State Council, China's ruling body, issued a circular listing seven measures to regulate investment in fixed assets.

Such investment rocketed 70 percent in the first seven months of this year over last; July's figure alone exceeded 70 percent.

Such investment pushes up raw material prices and thus inflation, which is running at over 20 percent in most urban areas.

The State Council order said projects that don't match national policy, particularly hotels, offices and posh houses, "must be rigorously reassessed and construction must stop or be slowed down."