China seeks to cool overheated economy

China will hold down industrial investment as it tries to rein in surging growth, officials said today, warning that wasteful spending and inflation could threaten its economic boom.

“The system is weak. The structure is irrational,” Ma Kai, director of the government’s main economic reform agency, said at a news conference during the annual meeting of China’s parliament. “All these problems are yet to be resolved.”

On Saturday, Premier Wen Jiabao announced a target of 8% economic growth in 2005, marking a new effort to rein in growth that last year hit a blistering 9.5% – by far the highest rate for any major economy.

Communist authorities worry that such high growth is driving unneeded investments in factories, shopping malls and other projects that could set off politically dangerous inflation and leave banks burdened with unpaid debts.

Ma noted that excess investment in construction and factory projects remained a risk, noting that 150,000 projects were started in 2004, with 20,000 launched just in December.

“There are new problems cropping up as we go along,” he said.

The government is further tightening control over use of scarce land, strengthening enforcement of controls and requiring companies to meet stricter regulations, Li Yuan, deputy minister of China’s Land and Resources Ministry, said.

Ma warned that China’s power-generation industry faced especially severe problems from poor planning and mismanagement. A lack of generating capacity has led to months of shortages in areas across the country.

“There is low efficiency and high waste,” Ma said. “If this is allowed to continue, the power shortages will just continue. And rapid economic growth will not be sustainable.”

Ma and the other officials didn’t announce any major new economic initiatives, though Wen said Saturday that the government would push ahead with capitalist-style reforms.

Wen said the government aims to create 9 million new jobs while holding inflation to 4%.