China Stimulus Spurs Growth, New Problems

Q2 growth could be 8% but decreased revenues, growing loans and rising inflation are problems.

Beijing's stimulus measures are showing results but have also led to new problems, including soaring bank loans, fears of rising inflation and slumping fiscal revenues, state media said on July 13.

Growth in the second quarter is likely to be close to 8%, rising from 6.1% in the first three months of the year, the People's Daily said, citing an analysis by the National Statistics Bureau. "The active fiscal policy and moderately loose monetary policy have had enormous effect. But new problems such as sharply decreased fiscal revenues ... fast growing bank loans and public expectations of rising inflation have emerged in the implementation of the policies," the report said.

Private investment is lagging while a recent central bank survey indicated consumer spending has touched a historic low, reflecting rising concerns over employment and income growth, it said.

"Some positive signs in the economy do not mean the difficult time is over. We should realize it clearly that ... the foundation of an economic recovery is not solid and internal growth driver is yet to be strengthened," it warned.

To avoid "hidden financial risks," the government should "guide credit to grow rationally and optimize loan structure," offering greater support to small and medium-sized businesses and the agricultural sector, it added.

Copyright Agence France-Presse, 2009

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