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By Bloomberg News
Sept. 7 (Bloomberg) -- China’s government shouldn’t let market volatility deter it from “fine-tuning” economic policy to avoid drastic adjustments later, central bank adviser Fan Gang said.
“Macroeconomic policies must be preemptive,” Fan said at a trade fair in Xiamen, southern China, today.
The Shanghai Composite Index is down about 16 percent from this year’s Aug. 4 peak on concern that government efforts to cool credit growth after a record 7.37 trillion yuan ($1 trillion) of loans in the first half will choke off the nation’s recovery. China will study the use of “regulatory tools” to adjust bank lending, central bank Deputy Governor Su Ning said Sept. 5.
Shanghai’s stock benchmark was up 1.6 percent as of the 11:30 a.m. local time break in trading.
Bank lending fell in July to less than a quarter of June’s level. Premier Wen Jiabao pledged Sept. 1 to maintain stimulus spending and a “moderately loose” monetary policy, saying the economy is at a critical stage.
China’s commitment to existing policies doesn’t rule out adjustments, Fan said.
“Is it that the policies to tackle the financial crisis can never be changed?” he asked. “New loans totaled almost 8 trillion yuan in the first half. Is it that the government can only wait for another 8 trillion yuan to be extended before it adjusts policies?”
‘Appropriate’ Credit Growth
The People’s Bank of China said Aug. 5 that it would fine- tune monetary policy as needed and guide “appropriate” growth in credit to aid the economy’s revival.
The central bank has left borrowing costs and banks’ reserve requirements unchanged this year after cuts in the final four months of 2008 to counter the deepening global financial crisis. The key one-year lending rate is 5.31 percent and the nation’s biggest banks are required to set aside 15.5 percent of deposits as reserves.
China is unlikely to raise rates or reserve requirements within the next six months, Guosen Securities said in an e- mailed report on Sept. 2, citing an unidentified central bank official.
There is only a small possibility of any increase, Guosen cited the official, a credit-control expert, as saying at an event hosted by the brokerage on Sept. 1. First-half lending growth was not sustainable and new loans will be smaller from August, Guosen cited the official as saying.
--Li Yanping. Editors: Paul Panckhurst, Stephanie Phang.
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net
Michael Dwyer at +65-6212-1130 or mdwyer5@bloomberg.net
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