The economy is going forward as the stimulus package started working
Posted in General on 20. Jun, 2010
“The economy is going forward as the stimulus package started working. Andlooking into the future, the second quarter and the remainder of this year willcontinue this recovery trend,” said Yi, who was speaking in English. BULLISH GOLDMAN Goldman Sachs on Wednesday became the latest bank to take a rosier view ofprospects for the world’s third-largest economy. Goldman marked up its projection for GDP growth this year to 8.3 percentfrom 6.0 percent and stuck its neck out with a forecast for 2010 of 10.9percent, up from 9.0 percent. “We acknowledge that policy stimulus has been more determined and persistentand the response from domestic demand has come in earlier and more strongly thanwe envisaged previously,” Goldman economists Helen Qiao and Yu Song said in areport. UBS, Royal Bank of Scotland and Barclays Capital all raised their forecastsafter last Thursday’s first-quarter GDP figures and accompanying data for March,which showed a marked pick-up in growth in industrial output and fixed-assetinvestment.
By contrast, Standard Chartered Bank on Wednesday reiterated its forecast of6.8 percent growth this year, while a senior government researcher cautionedthat the recovery would be bumpy. “The possibility for China to have a steady and quick recovery is not bigdue to the current external economic situation and structural problems with thedomestic economy,” Fan Jianping, chief economist with the State InformationCenter, a leading think-tank, said. “The impact of the global financial crisis is spreading and exerting an evendeeper effect on China,” he wrote in the China Securities Journal. RELAXED ON FX RESERVES Some economists are concerned that the jump in lending will finance poorinvestments that will eventually saddle China’s banks with a new crop of badloans. Wu Xiaoling, a former PBOC vice governor, told Reuters the surge in lendingwould be no good for the economy if it continued. Speaking on the sidelines ofthe conference, she urged banks to recognise the risks they are taking and toapply the brakes.
Yi said the central bank was of course concerned whether the boom in creditcould be sustained and acknowledged that it might have some negativerepercussions. “We realise the negative side and possible risks, but overall it’s apositive development. For the remainder of this year, I hope that lending willstabilise at a sustainable rate That is the best scenario,” he said. Yi said Beijing was comfortable about a slowdown in the pace at which it isaccumulating foreign exchange reserves, which grew just $7.7 billion in thefirst quarter to $1.9537 trillion In all of 2008 the stockpile increased $417.8billion. China was relaxed because it was undergoing a structural adjustment to itseconomy that would lead to a more balanced external payments position, Yi said,adding that the sharp rise in the balance of payments in recent years was notsustainable “We have a ‘take it easy’ attitude We already have enough reserves,” Yisaid.