China’s economy is in better shape than expected with last month’s industrial output growth exceeding forecasts, but it still faces big challenges, Chinese Premier Wen Jiabao (溫家寶) said yesterday.
Wen, speaking on the day when the central bank reported a record rise in new lending last month, said industrial output growth picked up to 8.3 percent last month from a record low of 3.8 percent in the first two months of the year.
“China’s economy has shown some positive signs, but we can all see that our economy still faces some very big difficulties,” Wen told reporters in the Thai seaside resort of Pattaya, where East Asian leaders were to hold a summit.
In the latest sign that the government’s efforts to revive the economsy were beginning to bear fruit, new loans and money supply growth surged to record highs last month.
Banks extended 1.89 trillion yuan (US$276.6 billion) in local currency-denominated loans last month, bringing the total for the first quarter to 4.58 trillion yuan — nearing the government’s full-year target of at least 5 trillion yuan.
That helped lift annual growth in the broad M2 measure of money supply to a record 25.5 percent last month, up from 20.5 percent in February and easily exceeding economists’ expectations of a 21.3 percent rise.
Analysts saw the lending figures as a sign that Beijing’s moves to boost domestic demand were working, but they also cautioned against jumping to the conclusion that a rebound was just round the corner.
“China has completed over 90 percent of its full-year target for bank lending in the first three months, and this is absolutely not sustainable,” said Zhang Xiaojing (張曉晶), an economist with the Chinese Academy of Social Sciences in Beijing.
“In addition, I don’t think we can say that the worst time for the Chinese economy is over,” he said. “The March lending is strong, but whether the strong growth in bank credit can revive the real economy sector is still unclear.”
One of the main concerns about the surge in lending has been that it could be financing stock market speculation as much as actual investment and spending.