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China restates easy-credit stance
Published on: 2009-08-06
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BEIJING -- China's central bank reaffirmed its intention to continue easy-credit policies, citing numerous risks to early signs of a recovery in the global economy.

"China's economy is now in a critical period of stabilization and recovery, and maintaining stable and rapid economic growth is still the most important task we face," the People's Bank of China said in its quarterly monetary-policy report. "Although the general trend of stabilization in the [global] economy has been basically established, the process of recovery may be slow and tortuous."

With global demand for China's exports still weak, a solid rebound depends on domestic consumption and investment, the central bank said. Chinese companies may be more willing to ramp up production now that inventories have been reduced.

Sentiment among private-sector businesses remains weak, it said, and consumers' worries about future income could crimp spending. "The foundation of the economic recovery is not yet stable," it said, echoing other agencies' recent comments.

The central bank also cited numerous uncertainties to the outlook for the global economy, including changes in the U.S. dollar's exchange rate, commodity prices, inflation expectations and protectionism. "These factors could, in combination with inevitable shocks to the economy and financial markets, test market confidence and affect the progress of the recovery," it said.

Given such an uncertain external environment, the central bank said the drive to maintain domestic growth requires continuing the policies that led to a 33% surge in bank lending this year. It didn't rule out minor adjustments within that broad direction, and indeed has engineered some shifts to domestic money-market conditions in recent weeks.

"We will continue to unswervingly implement the appropriately loose monetary policy, and carry out fine-tuning with market tools according to changes in the domestic and international economic trends and prices," the report said.

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