Although some overheated sectors were cooled down against the background of macro-control, the consumer price index (CPI) began to keep rising. Out of worry that whether a soft-landing of the national economy can be achieved, and seeing the consecutive raising of interest rate by the Federal Reserve, people began to expect a raise of interest rate at home.

According to an article carried on news weekly "Liao Wang" (Outlook), China is facing a structural problem in its economy, and raising interest rate, a market-oriented method, can hardly produce any effective regulatory effect on overheated sections at the current stage.

This round of economic overheating started in 2003 is structural and systemic, the article said, instead of a "typically periodic one". Its most noticeable feature is that the micro-economic bases of economic growth are still government and market--government remains quite powerful in developing industries, pushing forward urbanization and interfering with micro-level enterprise conducts, and some links have been strengthened instead of weakened, only that their influence seem less direct than in the past. Under such circumstances, raising interest rate can only exert very limited impact on regulating economic growth.

The structural nature of the overheating is firstly displayed in the serious imbalance between noticeable hot investment and rather cold consumption growth, while raising interesting rate will exert "downward pressure" on both items and as a result the imbalance will remain.

Secondly, the structural overheating is driven by "the growth pattern of sudden huge profits" in sectors such as real estate, a growth pattern that will not be substantially touched by possible interest rate raising.

Thirdly, the main objectives of the macro-control this time are, through cooling down investment in overheated sectors, to coordinate internal consumption structure, balance demand and supply as well as to attain coordinated industrial development. This is apparently different from macro-control in the past that focused on controlling inflation. The raising of interest rate, if not forceful enough, will produce no effect at all and, if too strong, will hurt the self-growth mechanism painstakingly fostered in recent few years and once again plunge the economy into a state of deflation.

By People's Daily Online