China's overheated economy is showing signs of making a "soft landing", thanks to the government's macro control policies, particularly the tightening of land and credit supply, a government think tank said in a report.

 

"Our view is that the policies and measures taken in the latest round of macro control moves are appropriate and effective, and that the economy is likely to make a soft landing," says the report composed by the economic research institute under the National Development and Reform Commission, China's top planning body.

 

The report reflects findings from a field study in Zibo city of Shandong Province in east China and Baoding city in north China's Hebei Province.

 

The study shows that Zibo, which has far more heavy industry than Baoding, is more affected by the macro controls.

 

Zibo's economy is dominated by heavy industries such as steel, coke, cement and textiles. All of these sectors, which have attracted hefty investments, are targets of the macro controls.

 

The city recorded only three new major investment projects in 2006, compared to 24 in 2002.

 

The study also shows that the tightening of land supply is proving to be the most effective means of reining in runaway investment.

 

Both cities have had to delay or abandon projects because they have used up their entire annual land quota.

 

The report further says that tight land supply has forced local governments to improve efficiency in land use. It has also forced investors to move less profitable industries to the less-developed hinterland, which is exactly what the government has been trying to do.

 

The report calls for further reform to the current land system, giving farmers greater bargaining power in land sales.

 

The impact of tighter credit supply, another key macro control tool, was seen as less positive.

 

Private firms are more vulnerable than state-owned or ex-state-owned companies and always become the first victims of tighter credit supply, the report says.

 

Figures from the National Bureau of Statistics show that the Chinese economy is cooling off. Growth for the first three quarters was 10.7 percent, against 10.9 percent for the first half year and 11.3 percent in the second quarter.

 

The State Information Center, another think tank under the NDRC, said last week that the growth rate will slow further to 10 percent in the fourth quarter, and that the annual growth rate for 2006 will be around 10.5 percent.

 

(Xinhua News Agency November 7, 2006)