Monday, September 5, 2011 - 00:25

China Govt Econ: Tightening Is 'Crashing' The Economy: Press

BEIJING (MNI) - Chinese GDP growth could plunge to below 7% if the
government doesn't act now to shift the focus of policy to a more
accommodative stance from the current anti-inflationary bias, an
economist and advisor to the National Development and Reform Commission
said in comments published Monday.

"The government should abandon its loan quotas as soon as possible
and boost money supply growth to at least 17%. Now is the key time to
shift the focus of policy to pro-growth from anti-inflation," said Wang
Jian, director of the China Society of Macroeconomics, a research
institution backed by the powerful economic planning body.

Wang told, a financial portal, that M2 growth last month
decelerated to just above 13% y/y versus the 14.7% rise at end-July.

"Tightening is crashing the economy. 17% money supply growth is
appropriate. 13% growth is smothering the economy," he said, forecasting
a marked slowdown even if the government takes his advice now.

He said GDP growth will fall below the targeted 8% in the first
quarter next year and decelerate to 7%, though a global recession could
push growth lower.

The hit to exports from a slowing global economy will see a wave of
closures among small and medium-sized enterprises before the end of this
year, Wang warned, noting that many have been borrowing heavily and at
high cost from the underground financing system.

The CNY1 trillion in deposits which left the banking system in July
mostly went into money underground financing, he warned.

He dismissed concerns about inflation, arguing that 6% to 7% is a
long-term trend as food and labor costs rise "but that's not something
to fear".
** Market News International Beijing Newsroom: 86-10-5864-5274 **

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