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Central banker warns on recovery

CENTRAL bank Governor Zhou Xiaochuan cautioned against jumping to the conclusion that China is already on the path to economic recovery after data issued last Thursday showed signs of an upturn in momentum.

Zhou caused a stir in March when he floated the idea of reducing reliance on the US dollar as the world's primary unit of foreign exchange by developing the Special Drawing Rights (SDRs) issued by the International Monetary Fund.

Speaking at the Boao forum yesterday, Zhou said his proposal on SDRs was intended mainly to contribute his thoughts on the root cause of the financial crisis and what needed to be done in the long run to prevent such situations in the future.

He was not suggesting that drastic changes to the financial system needed to be taken in the short term, Zhou said.

"It's just like treating a patient. First we need to make a diagnosis. Then comes treatment," Zhou told the forum.

"But right now, not all the doctors have the same diagnosis ... Unfortunately, it seems that there is still no consensus among various countries about the source of the financial crisis," he said.

Still struggling

He also emphasized that, even though there were positive signs the economy was starting to recover, China is still struggling against the global economic slowdown and financial crisis.

"The situation of the crisis is changing constantly. We need to tweak our policies in line with the changing stage of the crisis," he said.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said at the forum that he was cautiously optimistic about the economic outlook and thought banks had adequate provisions to cover any potential rebound in bad loans.

Liu said that the government's target of new loans this year was not limited to 5 trillion yuan (US$732 billion) and all funds should help keep the sustainable and rapid development of the economy.

The government said earlier it expected Chinese banks to extend about 5 trillion yuan of new loans this year. However, new loans in the first quarter of this year already exceeded 93 percent of the figure.

The amount of new loans boomed in the first three months because a considerable number of projects passed evaluation procedures and were put into operation, said Liu.


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