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BOC signals continued liquidity

By Wang Yu and Bi Xiaoning (China Daily)
Updated: 2009-09-12 13:50

Bank of China's deputy head gave an optimistic outlook for China's growth next year while forecasting moderate global gains.

From left: Zhu Min, group executive vice-president at the Bank of China, Heizo Takenaka, director of the Global Security Research Institute at Keio University, Japan, and Stephen S. Roach, chairman of Morgan Stanley Asia, discuss the global economic outlook at the Summer Davos forum yesterday. [Wu Zhiyi]

China's GDP will grow more than 8 percent next year as the world average fluctuates between 1.5 to 2 percent, Zhu Min, group executive vice-president of Bank of China, said at the Dalian Summer Davos forum yesterday.

Special coverage:  Summer Davos 2009

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Zhu's confidence in the Chinese economy largely lies in the 4 trillion yuan stimulus package from by the Chinese government that is fueling construction in railways, nuclear power stations and urban utilities, which will then lay the foundation for future development, he said.

But he noted potential bubble markets in real estate, commodities and stocks. In contrast there is a danger of deflation in the industrial segment as profits of various industries are dropping, Zhu said.

He noted that industrial projects require more investment, so bank loans in the second half of this year should be project-oriented and industry-driven.

Zhu asserted that it is still too early to worry about excess liquidity since the world economy is far from an actual recovery.

The senior banking official assured business leaders from both home and abroad that liquidity would not be withdrawn precipitously this year.

"The economy is still fragile. Although there are some signs of recovery, liquidity is still needed," Zhu said.

He implied earlier that a dramatic change in lending in the second half of this year is not likely after massive supplies of credit in the first six months.

Stephen Roach, chairman of Morgan Stanley Asia, noted that China has done a good job thus far handling the global financial crisis, but instead of quantity growth, the country should now focus more on quality development.

Zhu said that in the medium term, the Chinese industrial segment faces the challenge of overcapacity.

In the long run, sustainable industries with environmental responsibility deserve more attention, Zhu added.