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Sep 20, 2009
China prefers bubble to trouble
China's economy expanded 7.9 per cent in the second quarter after a 6.1 per cent expansion in the first three months of 2009. -- PHOTO: AFP
BEIJING - DESPITE fears of bubbles in China's property and stock markets, Beijing will maintain its stimulus policies and pump more money into the economy until its manufacturing sector recovers, analysts say.
With weak exports dragging the economy down, Beijing was relying on buoyant apartment and share prices to help it meet its target of eight per cent growth - and does not want to wind back its stimulus measures just yet, they say.
'Public and private statements by Chinese officials signal clearly that they are not worried about asset bubble prices or overheating, and they are instead concerned about the sustainability of the economic recovery now under way,' Andy Rothman and Julia Zhu, economists at CLSA, said in a report.
China's economy expanded 7.9 per cent in the second quarter after a 6.1 per cent expansion in the first three months of 2009.
That growth was largely underpinned by a four-trillion-yuan (S$828 billion) stimulus package unveiled in late 2008 and 7.4 trillion yuan in bank lending in the first half of this year.
But soaring property and stock prices this year raised fears that much of the money was being funnelled into asset markets for quick profit - rather than the real economy as intended.
Property sales soared by more than 60 per cent in the first seven months of this year and share prices piled on more than 90 per cent in the same period - triggering fears of emerging asset bubbles.
'Asset prices are the very object of policy in China,' Michael Kurtz, an analyst at Macquarie Equities in Shanghai, told AFP. 'China is walking a fine line where they need asset prices to remain well supported while at the same time discouraging dynamics that create bubbles.'
While policymakers have acknowledged concerns about bubble build-up, they have said there are no immediate plans to change tactics.
Premier Wen Jiabao said earlier this month that China's recovery remained fragile and that it was too soon for Beijing to reconsider its current stimulus policy.
And central bank vice governor Su Ning was quoted as saying last week that monetary policy would remain loose until the end of 2010. -- AFP
Sep 20, 2009
China prefers bubble to trouble
China's economy expanded 7.9 per cent in the second quarter after a 6.1 per cent expansion in the first three months of 2009. -- PHOTO: AFP
BEIJING - DESPITE fears of bubbles in China's property and stock markets, Beijing will maintain its stimulus policies and pump more money into the economy until its manufacturing sector recovers, analysts say.
With weak exports dragging the economy down, Beijing was relying on buoyant apartment and share prices to help it meet its target of eight per cent growth - and does not want to wind back its stimulus measures just yet, they say.
'Public and private statements by Chinese officials signal clearly that they are not worried about asset bubble prices or overheating, and they are instead concerned about the sustainability of the economic recovery now under way,' Andy Rothman and Julia Zhu, economists at CLSA, said in a report.
China's economy expanded 7.9 per cent in the second quarter after a 6.1 per cent expansion in the first three months of 2009.
That growth was largely underpinned by a four-trillion-yuan (S$828 billion) stimulus package unveiled in late 2008 and 7.4 trillion yuan in bank lending in the first half of this year.
But soaring property and stock prices this year raised fears that much of the money was being funnelled into asset markets for quick profit - rather than the real economy as intended.
Property sales soared by more than 60 per cent in the first seven months of this year and share prices piled on more than 90 per cent in the same period - triggering fears of emerging asset bubbles.
'Asset prices are the very object of policy in China,' Michael Kurtz, an analyst at Macquarie Equities in Shanghai, told AFP. 'China is walking a fine line where they need asset prices to remain well supported while at the same time discouraging dynamics that create bubbles.'
While policymakers have acknowledged concerns about bubble build-up, they have said there are no immediate plans to change tactics.
Premier Wen Jiabao said earlier this month that China's recovery remained fragile and that it was too soon for Beijing to reconsider its current stimulus policy.
And central bank vice governor Su Ning was quoted as saying last week that monetary policy would remain loose until the end of 2010. -- AFP
