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Planner: China rebound still depends on stimulus

Planner: China rebound still depends on stimulus

China's investment-driven economic rebound still depends on stimulus spending, a planning official said Friday, and he promised easy credit will continue despite concerns its $1 trillion lending boom might cause financial problems.
"Our national economy is experiencing a rebound that is mainly driven by policies, and internal forces to support economic expansion are not strong," the deputy chairman of the Cabinet's National Development and Reform Commission, Zhu Zhixin, said at a nationally televised news conference.
Zhu said Beijing will stick to its "relatively easy credit policy" and a "proactive fiscal policy" _ a reference to the 4 trillion yuan ($586 billion) stimulus for the world's third-largest economy.
"If we waver in our policies, it will inevitably reverse the positive trends of economic stabilization and development," he said.
Zhu's comments highlighted official concern about the strength of a recovery that saw China's economic growth accelerate to 7.9 percent in the latest quarter, up from 6.1 percent in the previous quarter. The biggest gains were in construction and other stimulus-financed areas, while retail sales and other private sector activity lagged.
China is expected to be the first major economy to emerge from the worst global downturn since the 1930s. But officials say a recovery is not firmly established and is vulnerable to changes in the world economy.
Analysts are concerned that stimulus-fueled speculation in stocks and real estate could cause a boom and bust in those markets. They say reckless lending could add to pressure for prices to rise and leave banks burdened with bad debt.
Total lending by Chinese banks soared to 7.1 trillion yuan ($1 trillion) in the first half of the year. Economists say an estimated 15 percent of that has flowed into stocks and real estate in violation of government lending rules.
The country's main stock index has risen more than 80 percent this year and real estate spending is climbing, adding to fears of possible unsustainable market bubbles.
A deputy central bank governor who joined Zhu at the news conference said the bank has tools to manage lending, but he said regulators would avoid abrupt steps such as imposing credit quotas. The official, Su Ning, said the bank had no plans to change monetary policy but would "fine-tune" its application.
Su said he expects lending to slow without government intervention because developers borrowed heavily earlier to launch projects and will need less money.
"I do not think the growth in total lending will be as fast as that in the first half of the year," Su said. "The moderately easy monetary policy will continue to be implemented and we will ensure the steady growth of the total amount of lending, which will boost and provide support to our economic development."
The central bank said in a July 28 report that inflation could pick up in the second half of the year. But Su said, "I have not seen any signs of inflation yet."


Updated : 2021-10-19 17:54 GMT+08:00