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Stimulus plans pave the way for full recovery, says expert

CHINA'S stimulus plans are very impressive, and more investment will be the key to success, Lawrence Greenwood Jr, vice president of the Asian Development Bank, said on Saturday.

Under the monetary policy adopted by the government late last year, China's bank lending increased by a record high of 1.89 trillion yuan (US$277.9 billion) in March, making new loans in the first quarter of this year reach 4.58 trillion yuan, or 93 percent of the target of new loans for the entire year of 2009, according to data released by the People's Bank of China.

China's monetary policy expansion was probably "the largest and the most effective in the history of mankind," Greenwood said at the Boao Forum for Asia, a platform for promoting regional cooperation and dialogue in China's southern province of Hainan.

The large credit increase might lead to more bad loans, but that was "a secondary consideration at this stage of the crisis," Greenwood said.

The expansion of credit is needed to stimulate economic activity and get the economy going again, he said, adding it is the best way to avoid non-performing loans.

China's economic stimulus package is already paying off, and positive changes have taken place in the economy, Premier Wen Jiabao said on Saturday at the opening ceremony of the conference.

Though the ADB forecast China's GDP growth at around 7 percent, lower than the 8 percent target set by the Chinese government, Greenwood said the figures are roughly "in the same territory."

China's retail sales and fixed-assets investment figures in the first quarter are all better than expected and some positive signs have appeared, he said.

Chinese officials are facing the challenge of maintaining the growth rate while transforming the economy, but the country has seen good investment numbers and a solid increase in consumption, which would make up for the drop in exports, he said.

He noted that China, and Asia as a whole, could not return to an export-oriented development pattern that depended on demand in the United States and Europe.

"Those days are over, because that was based on the housing bubble. The bubble's burst, and US consumers are now saving and not spending," he said. "The economic structure and the pattern of trade and investment will be quite different from what we have known in the past six years ... We need a more sustainable model of growth."


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