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| China’s Banking Regulator Says It’s Too Soon to Talk of China Stimulus Exit |
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China’s banking regulator said it’s too soon for the government to start winding down stimulus efforts even as growth in the world’s third-largest economy accelerates to more than 8 percent. “It’s far too early to talk about an exit strategy,” Liu Mingkang, chairman of the China Banking Regulatory Commission, told a banking conference in Hong Kong today. The economy “may face a bumpy road ahead.” “There are real risks to China’s growth next year,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland Group Plc in Hong Kong. “The economy is still very reliant on public investment and we are yet to see the private sector fully recover.” Government-influenced spending on building projects has driven more than four-fifths of China’s expansion this year, according to the World Bank. China’s stance contrasts with countries that are beginning to withdraw stimulus as the global economy heals. Australia’s central bank this week became the first among the Group of 20 to raise interest rates since the height of the financial crisis. U.S. Federal Reserve Chairman Ben S. Bernanke said yesterday he is prepared to tighten policy once the economic outlook improves “sufficiently.” China’s economic growth accelerated to 7.9 percent in the second quarter from a year earlier, after slumping to 6.1 percent in the first three months. “China’s policy makers will want to see private sector demand becoming strong enough for the economy to wean itself off government support,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “That’s not the case right now.” China is relying more than Australia on government support for economic growth and its consumer prices are falling while Australia’s are climbing, Kowalczyk added. Chinese Premier Wen Jiabao announced a 4 trillion yuan ($586 billion) stimulus package last November and the central bank scrapped limits on bank lending, spurring record credit growth and the construction of railways, roads and cheap housing for low-income families. China’s unprecedented surge in new lending to more than $1.19 trillion in the first eight months has helped the economy to bounce back. Liu predicted an expansion of more than 8 percent in the third quarter from a year earlier. That compares with a 9 percent median estimate of 10 economists surveyed by Bloomberg News. The government is scheduled to release gross domestic product figures on Oct. 22. The International Monetary Fund said Oct. 1 that China’s economy will expand 9 percent in 2010, more than the 8.5 percent it estimated in July. China will stick to a “moderately loose” monetary policy and guide reasonable loan growth to further cement its economic recovery, the central bank said Sept. 29 after a quarterly monetary policy meeting.
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