TIANJIN: China cannot rely on loose credit to lift its economy, Premier Li Keqiang said, adding that it is difficult for the country to avoid short-term fluctuations in growth.
Speaking at a forum in China’s northern city of Tianjin, Li obliquely referred to a surprising slump in China’s credit supply in July by saying that the data remained within a “reasonable range” despite its recent volatility.
A broad measure of liquidity in China’s economy, also known as total social financing, or TSF, unexpectedly tumbled to a six-year low in July, alarming global investors already worried about the country’s cloudy growth outlook.
Li assured the audience that China’s economy could grow by around 7.5 percent this year as targeted by the government, but reiterated Beijing’s view that a healthy job market was more important than delivering a certain level of economic growth. “There is already a lot of money in the pool. We cannot rely again on increasing the supply of currency to stimulate economic growth,” Li said.
“As of the end of August, the broad M2 money supply was only up 12.6 percent compared with a year earlier,” he said. Xinhua had reported Li as saying M2 money supply grew 12.8 percent in the period. It was not immediately clear which figure was right.
A 12.6 percent rise would be the weakest pace in five months. China is set to release its credit data for August between Sept 10 and 15. Like policymakers around the world, China has fallen back on looser credit supply in recent years to bolster its economy.
In the aftermath of the 2008/09 global financial crisis, China’s M2 money supply rose an average 24 percent every month in 2009 and 2010.
Reuters
