CRI听力：China Sticks To Loose Monetary Policy

Reporter:
China's new loans rose to nearly 2 trillion yuan, or some 280 billion US dollars, last month. M2, the broadest measure of money supply, grew over 25 percent.(www.hXen.com)

It's noted as the most over the past decade by Dr. Peng Xingyun from China's Academy of Social Sciences.

"The rapid loan growth in the first quarter has gone far beyond expectations of bankers, economists and even financial authorities. Given the global financial recession, the credit boom in China can attest that the country's economic recovery is well underway. Plus, capital expansion helped to revive the asset market, like the rebound of the real estate and stock markets since the end of last year. I believe China's asset market will keep its active response to the credit growth."

But he also warns about the possibility that bad debts and asset bubbles could result from a credit spree.

"If moves are not taken to slow down the pace of credit growth, it will increase the risk of asset bubbles. Over the next few months, I would say, the central bank will start to control their money supply. "

Plus, the momentum that a loose monetary policy brings to market growth will eventually slow down against the backdrop of a slumping world economy.

Professor Michael Pettis from Peking University explains.

"We have to be very careful here because to a certain extent both the very loose fiscal monetary policy, especially the huge jump in lending plus fiscal expansion represents sort of bet. The bet is the global economy will recover fairly soon. Much of the expansion is taking place on the side of manufacturing and infrastructure. So China's increasing productive capacity in responding to the crisis. But I'm afraid that the global contraction will continue to go on for at least two or three more years. We may find that at the end of this year or beginning of next year, the balance sheets of the banks and governments are much weaker than now."

Professor Pettis says Chinese policy makers have made the task of transitioning the loan system part of its working agenda. But he also stresses that there is no historical precedence for a country to fulfil the task so quickly.

Wang Ling, CRI news.