New officials 'threaten' China's economic curbs

China's efforts to curb its red-hot economy are under threat from a batch of eager new leaders at the regional level keen to splash out on investment projects, state media said Wednesday.

The central government has just appointed top officials in major cities such as Beijing, Shanghai, Chongqing and Tianjin as a prelude to more local government reshuffles expected in the first quarter, the China Daily reported.

"Newly appointed local officials may embark on a slew of projects to spur growth," said Zhu Jianfang, Beijing-based chief economist at CITIC Securities, according to the paper.

"This may counteract the central government's efforts to cool the economy."

Newly appointed government officials have a history of spending big on prestigious investment projects just after assuming office, aiming for a boost to local employment and tax revenues.

The paper cited figures showing that outstanding loans more than doubled to 1.6 trillion yuan (US$220 billion at the current exchange rate) in the first half of 2003, after the last major local government reshuffle.

This confirms a more general trend for local government objectives to be at odds with the central authorities, who are more concerned about macroeconomic issues such as the need to curb inflation.

In the first 11 months of last year, local governments approved about 90 percent of all fixed-asset investment projects, recently released government data showed.

Investment in plant, equipment and other types of fixed assets are considered one of the major factors behind growth that has pushed Chinese inflation to 11-year highs.

The Chinese economy likely expanded by 11.5 percent in 2007, earlier reports said, with official data due out later in January.