China to promote moderate growth in money supply, loans

China will flexibly use interest rates and reserve ratios, as well as other tools, to promote moderate growth of money supply and lending, deputy central bank governor Su Ning said on Monday. He told a financial conference in Shanghai that it was too early to judge if China's economic recovery was sustainable.
Lending should go to agriculture, major infrastructure projects and upgrading of technology, rather than to high energy-consuming projects or sectors with excessive production capacity, he added. "China should raise the quality of lending to support economic growth in order to lay a solid foundation for a new round of sustainable development," Su said.
"China's economy has a relatively big potential for sustainable growth because it is in a phrase of rapid industrialisation and urbanisation." China's economy has seen signs of bottoming out, helped by the government's 4 trillion yuan ($586.5 billion) stimulus package and loose monetary policies. Premier Wen Jiabao said new measures will likely emerge steadily throughout the year, official media reported on Monday.
The stimulus measures were having a clear positive effect on China's economy, and the situation had exceeded expectations, but whether such a trend would continue needed further observation, Su told the conference. China fell deeper into deflation, as consumer prices in April fell 1.5 percent from a year earlier, marking the third straight month of price decline, the government said on Monday. "The external environment remains tough, making it relatively difficult for China to meet its target for exports," Su said.
"Private sector investment is not yet active, industrial production remains at a relatively low level, and China still faces downward pressure in consumer prices as well as unemployment challenges. It remains to be seen weather the economy has bottomed out and continue its trend of recovery." Central banker adviser Fan Gang said last week that China's economy is expected to grow 7 percent to 8 percent this year and next, starting to recover in 2010.