China update, November 2004

34456 China Update World Bank Office, Beijing November 2004  China Update, November 2004 Overview following administrative measures that seemed targeted at limiting investments in specific sectors where the authorities Policy measures to cool down the economy appear to have saw excess capacity to be building up. Fiscal policy has also had some success, but it is too early to call the end of the contributed to limiting demand pressures, but monetary investment boom that has become known as "overheating". policy has shown an ambiguous stance. Growth in monetary GDP growth decreased to 9.1 percent year-on-year (y-o-y) aggregates and credit has slowed down considerably, in part in the third quarter of 2004, compared to 9.7 percent in the induced by "window guidance" of the central bank and first half and 9.9 percent in the last quarter of 2003. Growth further tightening of reserve requirements. This despite has still been mainly driven by investment, although retail continued capital inflows, which the authorities largely sales have also remained buoyant. Looking ahead, we sterilized. On the other hand, real interest rates have until expect GDP growth to ease further, to 9