One of the policy challenges currently facing China is how to deal with the early symptoms of an overheated economy, Credit Suisse First Boston analyst Jonathan Garner said Thursday.

Garner, managing director and global coordinator of China Research of Credit Suisse First Boston (CSFB), told Xinhua that he expects the US economy to grow at an annual rate of five percent in the latter half of this year.

He predicts that global economic growth will rise from 2.7 percent for 2003 to 3.6 percent in 2004.

He said the recovery of the global economy and the US economy will increase international demand for exports from China, which would increase the pressure on China's monetary policy.

China's economy has already shown signs of overheating as investment and bank credit grew at record speed in the first half of the year. Growing exports and the influx of foreign direct investment may lead to the further expansion of the money supply, said CSFB economist Dong Tao.

The situation will become even more complex as the Chinese central bank sells RMB and buys US dollars to maintain a stable exchange rate, Tao said.

Garner said the RMB exchange rate is not likely to change significantly any time soon.

Tao said the Chinese government has a number of policy options designed to alleviate the pressure on the exchange rate of RMB, including readjusting interest rates and relaxing controls on capital accounts.

The CSFB is awaiting Chinese government approval to enter the RMB-denominated securities market in China. Garner said the investment bank is fully confident of the prospects of the Chinese securities market and has made long-term commitments in this regard.

(Xinhua News Agency July 25, 2003)