Expert: China Will Not Tighten Money Until West Does

Friday, August 7, 2009 10:40 AM

China will not tighten monetary policy before developed nations do so, because it first needs a recovery in exports to support the economy, a government researcher said in remarks published on Friday.

Zhao Zhongwei, an economist at the Chinese Academy of Social Sciences, a government think-tank in Beijing, also said that easy credit was vital to stimulating private sector investment to drive the economy after a boost from public spending wears off.

The timing of China's exit strategy from its loose monetary policy would largely depend on the pace of its export recovery, he said.

"China's external demand is still facing uncertainty, despite recent signs of a pick-up in developed economies," he said in an article published in the official China Securities Journal.

China has begun to mop up liquidity at the margins after a record surge in bank lending fueled concern about bubbles forming in the country's stock and property markets.

Chinese exports fell 21.4 percent in June from a year earlier and the pace of decline is expected to be steeper in July, though there are signs that the picture may have begun to improve on a month-on-month basis.

Separately, another senior government researcher was cited by Xinhua news agency as saying that China is considering new ways to promote private sector investment in tandem with Beijing's massive stimulus program.

Luo Yunyi, head of the investment research department in the National Development and Reform Commission, a powerful planning agency, said that China's GDP should be able to grow by 8.3 percent this year as long as investment remains strong.

Capital spending increased 33.6 percent in urban areas in the first half compared with the same period a year earlier.

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