ADB says loan curbs may ease - ResearchInChina

Date:2008-09-17liaoyan  Text Size:

CHINA may further ease controls on bank lending and extend fiscal support to smaller firms, said the Asian Development Bank's latest report published yesterday, one day after the Chinese central bank announced a cut in its key lending rates and reserve requirement.

"The (Chinese) government has indicated that it will put more emphasis on maintaining economic growth in the second half of 2008 and in 2009. This is likely to mean that some administrative controls on bank lending are loosened to assist smaller firms," said the ADB in its Asian Development Outlook 2008 Update.

"Fiscal policy is expected to remain slightly expansionary, with spending raised on the reconstruction, agricultural development and social sectors."

The ADB kept its forecast for China's gross domestic product to grow in 2008 at 10 percent, the same as the prediction made in April. But it revised the outlook for 2009 down to 9.5 percent from 9.8 percent because of an expected smaller trade surplus and slower investment.

In the first half of this year, China's GDP grew 10.4 percent from a year earlier, easing from the jump of 11.9 percent last year. The trade surplus in the first eight months fell 6.2 percent to US$151.9 billion, US$10.1 billion less from the same period last year.

The ADB also projected China's inflation rate to grow 7 percent for this year and 5.5 percent for 2009, which explained why the authorities have now focused on maintaining growth and creating employment.

"The main risks for the 2009 forecast include sharper-than-expected deceleration in exports because of weakness in overseas markets or double-digit inflation that would require an aggressive tightening of monetary policy," said the ADB.

It ruled out the possibility of a hard landing, defined as a GDP growth below 7 percent, for the economy. But the ADB said growth could moderate to 7 to 8 percent if the risks mentioned above materialize, or if major natural disasters like an earthquake or livestock diseases were to happen.

The ADB lowered the outlook for Asia's economic growth in 2008 to 7.5 percent, largely on unstable financial markets, and said it would ease to 7.2 percent in 2009.

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