Conor O'Clery in Beijing reports on the state of the Chinese economy and fears about the effect of a possible boom and bust cycle on its fledgling stock markets

By CONOR O'CLERY

CHINA now has not only enough food to feed itself but is helping to supply the rest of the world, according to Mr Pieter Bottelier, head of the World Bank Mission to China.

It was a "truly astonishing" achievement which had gone unnoticed in the world's press, said Mr Bottelier during a briefing for western journalists in Beijing with Mr John Anderson, deputy chief of mission of the International Monetary Fund. The fact was that "China is contributing significantly to feeding the rest of the world". The World Bank has provided China with $26 billion (£15.6 billion) in loans and technical assistance.

For the second year in a row, China had a boom harvest, said Mr Bottelier. The country has become a major food exporter, mainly in meat, poultry and fish.

At the start of reforms in the early 1980s there was an approximate balance between food exports and imports but exports of food now run at $3 billion to $4 billion a year, far in excess of the cost of imports. The internal food market in China had also developed very significantly so that people could now buy fish fruit and vegetables the year round, he said. China did import grain but the silos were full and the concern was maintaining quality.

Both officials gave upbeat assessments of the economic prospects for China in 1997. Mr Anderson forecast a continuing rise in per capita incomes and another strong economic performance. He said there was some risk that a too-strong growth rate would fuel inflation.

One western economic expert said yesterday that the Chinese economy was straining like a racehorse and, if the central government let the regions go all out on investment, it could move into another boom and bust cycle.

The fear of a boom and bust cycle on China's fledgling stock exchanges had led to a crackdown on Chinese stock markets this week, analysts said. In the last eight months, share prices in Shanghai and Shenzhen stock exchanges surged by more than 100 per cent.

The People's Daily said on Monday that China's stock markets had overheated on widespread speculation and warned that, if the markets crashed the government would not step in to support them.

Stock exchanges this week introduced a 10 per cent limit either way on movements of prices for individual shares. For the last two days most shares on the Shanghai and Shenzhen stock exchanges have fallen to the floor of their permitted range.

Analysts said the move was also aimed at foreign and domestic speculators who had planned to pump money into the markets up to the June 1997 hand-over of Hong Kong to Beijing, then pull their funds out.

Mr Anderson said: "I don't believe there will be a great fall out from the stock exchange because the capitalisation of the stock exchange is small compared to any other asset or savings indicators in the economy."

Meanwhile, a prominent report in the China Daily yesterday startled western observers by indicating that China was losing its enthusiasm for joining the World Trade Organisation, which it had been lobbying heavily to become part of.

It quoted Mr Wu Jiahuang, director general of the customs tariff department, as saying that the barriers thrown up against Chinese membership were political and that, "accession or not, China has become indifferent and doesn't care any more

He described China's 10-year bid for entry to the General Agreement on Tariffs and Trade (GATT) and its successor, the WTO, as a "sunken boat" and an "ailing tree".

A government spokesman said later, however, that this did not necessarily reflect Beijing's formal position.

"We still feel the World Trade Organisation is a very important international organisation, although, of course, if China is not taking part then we should say it is incomplete," he said. Beijing has applied to join the WTO on the favourable terms granted to developing countries, but the United States and some other member countries argue that China's economy is too powerful to be given such treatment.

Beijing says it must be allowed a relatively long transition period to prepare key industries for the foreign competition they would face.