The stimulus policy will continue. Reports that it will stop come from a misunderstanding of the government’s position on this.
The government will not change its stimulus policies, this despite record bank lending in the first half of the year has raised fears over credit risks and asset bubbles.
Su Ning, deputy governor of the People’s Bank of China (PBOC) and seen in our illustration at a press conference in Beijing, said, "The central bank is still committed to a ‘moderately loose monetary policy".
"When we say ‘dynamic fine-tuning’, we do not mean the monetary policy but the monetary policy operations. We will sharpen the focus and intensify the pace of the policies."
"When we say ‘dynamic fine-tuning’, we do not mean the monetary policy but the monetary policy operations. We will sharpen the focus and intensify the pace of the policies."
It was that phrase "actively fine-tune policies" that had stories appearing that the government was going to be a dropping of the stimulus policies which could check liquidity.
The country’s banks have lent nearly RMB7.4 trillion ($1.08 trillion) in the first half of the year — far higher than the initial full-year target of RMB5 trillion.
On the back of this unprecedented rise in credit, the Shanghai Composite Index has rallied about 80% this year and real estate prices have rebounded to record levels in some major cities.
Zhang Jianguo, president of China Construction Bank, said on the bank would cut lending by about 70% to RMB200 billion in the second half to avert a surge in bad debt.
But the government thinks differently about easing the monetary policy. Su Ning, deputy governor of the People’s Bank of China (PBOC) said, "The PBOC did not use asset prices as a monetary policy target . . .The PBOC has a package of tools to keep money supply in check. There’s no inflation at the moment."
China Daily reported a recent All-China Federation of Finance and Commerce report said that profitable industries, such as electricity, telecommunication, petrochemicals and finance, are largely closed to private investment, and the government still has a monopoly over education, healthcare and cultural industries.