China should fine-tune economic cooling policies by easing state-imposed curbs on bank loans and raising interest rates when necessary instead, a top government think-tank and economist were quoted on Wednesday as saying.
Debate on whether China needs to relax its tightening policies picked up after data showed the economy expanded 9.1 percent in the third quarter from a year earlier, marking the third consecutive quarter of slower growth.
The government should "fine-tune its polices and measures in a timely and appropriate manner to achieve coordinated development", the China Securities Journal quoted a report by the investment research institute of the State Development and Reform Commission as saying.
"Restrictions on working capital and medium- and long-term loans to enterprises should be appropriately relaxed while medium- and long-term interest rates should be raised when necessary," the think-tank was quoted as saying.
The government should maintain a proactive fiscal policy to help sustain spending in the country's less-developed western regions and channel more funds into public utilities, it said.
The call for credit easing followed media reports on Tuesday quoting commission spokesman Cao Yushu as saying China needs to maintain economic controls in the face of energy shortages and a possible rebound in fixed-asset investment.
But Cao conceded that some industrial firms, particularly smaller firms, were feeling a squeeze in working capital.
A spokesman for the People's Bank of China said the central bank would be consistent in its policy.
"Any adjustment to the macro-economic policies needs a series of coordinating measures. The central bank has its own considerations," he told Reuters.
Worried that an investment bubble could turn economic boom to bust, Beijing has taken a raft of steps since last year, such as forcing banks to hold more money instead of lending it out and ordering a halt to new projects in areas like steel and property.
Wang Zhao, an economist at the cabinet's Development Research Centre, joined the calls for replacing administrative credit controls with a rate rise to help minimise the side-effects of government edicts.
"I believe it's necessary to raise interest rates in the future, but there must be a concerted relaxation of credit restrictions," Wang wrote in the Economic Information Daily.
"To prevent growth of investment and credit from resurging, it's necessary to raise interest rates."
He also said Beijing should speed up reforms to give lenders more leeway in setting lending and deposit rates and help reduce loans outside the banking system.
The central bank, while vowing to keep credit tight for now, has pledged to give market forces a greater role in guiding the economy as it seeks to strengthen and hone its policies.
Most economists say a slew of economic data issued last week suggests a measured slowdown in growth in the world's seventh-largest economy that would lessen the need to raise rates in the near future.
Consumer inflation slowed to 5.2 percent in September from a seven-year high of 5.3 percent in the prior two months, but producer prices rose 7.9 percent in the year through September, higher than the 6.8 percent rise in the 12 months to August.
The government has been moving steadily in recent years to liberalise interest rates, allowing lenders to charge borrowers between 0.9 and 1.7 times benchmark lending rates, but still setting fixed deposit rates.
The benchmark one-year yuan deposit interest rate is 1.98 percent and the one-year loan rate is 5.31 percent.
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