Rapid asset price increases in major markets since 2009 have been pushed by “ultra-loose” monetary policies by governments around the world and “don’t mean real economies have recovered or will recover strongly,” the People’s Bank of China said in a report posted on its Web site.
Such gains “unless they receive sufficient support from macroeconomic fundamentals, may lead to a new round of asset bubbles that may burst.”
That is a most serious warning from the Beijing-based bank.
The comments reflect concerns by policy makers in the world’s third-largest economy about risks facing the global recovery as governments debate when to withdraw stimulus implemented to fight the financial crisis.
Chinese Premier Wen Jiabao faces the same dilemma as he seeks to restrain inflation and curb property bubbles while maintaining growth.
The Chinese central bank said in its 2009 report on international financial markets that: “Central banks all face the pressing task of containing asset bubbles and inflation while ensuring economic recovery.”
The Central Bank said Governments worldwide have spent more than $2 trillion in fiscal stimulus to spur growth and may face difficulty coordinating exit strategies because of the “unbalanced global recovery.”
BusinessWeek reported Premier Wen Jiabao on March 5 pledged to maintain a “moderately loose” monetary policy this year to cement China’s recovery, while keeping inflation at around 3%. The People’s Bank of China is targeting a drop of 22% in new lending this year.