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. Last Updated: 07/27/2016

China Seeks to Cool 'Overheated' Economy

BEIJING -- In an unusually negative assessment, China's State Statistical Bureau said Friday that fast-rising industrial output, retail sales and inflation have put China's economy on the verge of a "red light" or danger zone.

In its report of major economic indicators for August, the bureau said the nation's consumer price index rose 25.8 percent compared to a year earlier, a slight increase from the 24.2 percent in July.

It attributed the continued climb in inflation, despite a government campaign to curb price hikes, to shortages of farm products resulting from natural disasters, very strong growth in income, and adjustments in prices of grain and oil earlier this year, the state-run Xinhua News Agency reported.

But in a sign that the government's inflation-fighting program may be having some impact, the bureau said capital investment by state-run enterprises rose 34.9 percent to 78.1 billion yuan ($9.15 billion) in August from the same period a year earlier -- a much lower growth rate than the 72.9 percent increase in July.

Economists say that only by slowing the flow of funds to inefficient state enterprises can the government expect to rein in China's double-digit inflation.

During the first eight months of this year, capital investment by state-owned enterprises totaled 492.2 billion yuan ($57.63 billion), up 44 percent from the same period a year earlier, the report said.

It said the consumer price index rose 22.8 percent between January and August.

Most other key indicators showed robust year-on-year growth in August:

?Sales of consumer goods rose steadily, with retail volume up 34 percent over a year earlier to $15.06 billion.

?Industrial output rose 17.6 percent to $15.63 billion in August.

?Bank deposits and savings rose $10.50 billion, more than triple the increase registered in August 1993, while total lending jumped 47 percent to $5.89 billion.

Friday's report said that strong market demand and improved business operations raised the sales rate of industrial products in August to 96.47 percent, nearly 4 percentage points higher than in the first half of this year.

However, other reports have warned of growing stockpiles of industrial products, particularly those produced by state-run firms.

"The ratcheting up of industrial production, market sales, cash payment by banks and inflation has already put the macroeconomy on the rim of the red light zone and this merits close attention," the statistical bureau said.

The Chinese economy has been one of the fastest growing in the world in recent years, leading to vast changes not only in economic structures, but also in the nation's social fabric. Chinese leaders have battled to keep the economy growing while simultaneously holding down any aspirations for political freedom that normally accompany economic boom times.