ADB warns of overinvestment
29 March 2007
The Asian Development Bank (ADB) has warned that China's failure to curb investment may lead to overcapacity and falling prices, turning its expansion into a "curse". ADB announced that if investment continues to grow at more than 20% yearly, the situation could lead to "excess capacity and deflation", Bloomberg reported. Fixed-asset investment surged 24% in 2006, exceeding a target rate of below 18%. China recently raised interest rates to the highest level in almost eight years and increased the amount of money lenders must set aside as reserves five times in eight months to slow investment. The government has also urged local governments to focus on efficiency and environmental programs rather than spending money on new factories.