The way to face up to investment rebound: Commentary

Editor's Note:Recently, some new situations have emerged in economic operation. Most noteworthy is that the growth rate of fixed asset investment has witnessed a certain degree of rebound after a glide in the chain ratio for several consecutive months. This reminds us that we must have a correct understanding of the complexity and protracted nature of macroeconomic control. Then, how to further raise our macroeconomic-control ability and speed up change in the mode of economic growth will be an important question for study.

Change of things often happens unexpectedly

Lately, some new situations have emerged in economic operation. What is most attractive is that the increase rate of fixed asset investment has witnessed a certain degree of rebound after a slide in the chain ratio for several months in a row. There has been an increase in the number of newly started projects and a substantial rise in the growth rate of the output of rolled steel and some other important raw and semi-processed materials and an increase in price.

Statistics show that in January-June, fixed asset investment of the whole society had a 28.6 percent increase year on year. In comparison, the growth rate of investment in January-July accelerated by 2.5 percent. If this can still be seen as a "basic equal" rate of increase, then viewed from the data of July, the volume of urban fixed asset investment accomplished went up 31.4 percent year on year, an 8.7 percentage points higher than that in June. This situation shows that the growth rate of investment is on the rise and the speed of investment rebound is being accelerated.

At present, remarkable achievements have been scored in macroeconomic control, but another situation has also appeared, and that is there has emerged a rebound in blind investment in some areas. This tendency, once expands, will directly affect the result of macroeconomic control.

This kind of rebound, which occurred after achievement has been gained in macro-control, easily makes people feel puzzled. However, we should not doubt the effectiveness of macro-control. Because historical experience has shown that a certain degree of investment rebound is not rare after quick result is achieved in each round of macro-control. The present question is how should we cope with this new situation.

As a matter of fact, the problem of blind expansion of investment and one-sided pursuit of the speed of economic growth has repeatedly occurred in economic development, the fundamental reason for this lies in imperfect system, incomplete legal system and extensive mode of growth.

It should be noticed that fixed asset investment is the source of this round of partial heated economy and is the most important aspect in macro-control. At present, the bad result of blind investment and low-level expansion in some industries has been felt, as manifested mainly in the monthly rise in enterprise inventory, the default of payments for goods between enterprises has begun to increase.

It can be said that investment rebound has clearly given us a hint. In a period of time to come, the macro-control means should be employed more for market control, at opportune time, the price should be gradually brought back to a rational level through the use of market leaver, so that investment approximates a reasonable growth rate. The price referred to here not only includes the price of funds, but also the price of land and other resources.

Experts remind that positive results, though already achieved, are only initial and phased ones. Although some unsound factors in the current economic operation have been kept under control, which, however, is not firmly based, deep-seated contradictions and problems affecting sound economic development have not been fundamentally resolved.

The present emergence of the rebound of blind investment in some regions and some other problems is not a bad thing. This is because it reminds us that we must have a correct understanding of the complex and protracted nature of macroeconomic control. In the second half of the year, how to further enhance macroeconomic control capability and accelerate change of the economic growth mode will be an important question for study.

More importantly, it is necessary to properly grasp the method and strength for macro-control, act on the basis of reality, avoid the use of a "uniform" method and at the same time overcome negative effect that may be brought about by administrative control, and give investors an accurate market signal. That is the only way to ensure achievement of the anticipated goal for macroeconomic control.

This commentary was carried on the second page of "East China News",( an affiliate of People's Daily), on September 7, and translated by People's Daily Online