02/01/2010, 00.00
CHINA

Beijing announces more aid for rural areas to sustain economic recovery

In January, banks lend 1.62 trillion yuan. Government fears money might fuel speculation. It opts to help rural areas grow.
Beijing (AsiaNews/Agencies) – Last month, Chinese banks lent 1.62 trillion yuan (US$ 230 billion), financial papers report. However, assets bubbles are the “real worry” for China’s economy, central bank adviser Fan Gang said. In the meantime, China’s central government is planning new aid and funding for the country’s rural areas.

China’s growth accelerated to 10.7 percent in the fourth quarter of 2009, the fastest pace since before the 2008 economic meltdown, with exports driving the recovery, especially in December. Experts warn however, that growth might owe more to extra government infrastructure spending and easy bank lending than to self-sustained growth. There is concern in fact that much of this money has been used on speculation, including real estate and stocks.

For this reason, the government has told banks to slow on loans, especially since too much lending might stoke inflation. Analysts expect tighter lending might be followed by a rise in interest rates.

Others note that Beijing has already benefited from a low exchange rate. The yuan’s current rate vis-à-vis the US dollar has remained unchanged for the past 18 months after a gradual rise in the previous years.

Now Chinese policy-makers want the economy to stabilise after rebounding to avoid inflation, said Zhang Liqun, a researcher at the State Council Development and Research Centre.

With exports growing again, so are prices for raw materials. This means, “companies may face a tougher environment with rising costs and intensified competition”.

Having signalled its intention of boosting domestic consumption, the government announced more investments in rural areas to create jobs and build local housing and infrastructure. Similarly, more would be done to strengthen rural financial services including micro-credit loans and insurance.

Traditionally, China’s countryside has been underfunded with respect to the rest of the country. A large gap has thus developed between urban and rural areas.

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