Premier Wen Jiabao said on March 5 at the opening of the annual session of the National People's Congress, the national legislature, that new yuan-denominated loans this year were expected to reach 5 trillion yuan.

In March alone, new yuan-denominated loans increased 1.89 trillion yuan. It was the third straight month that new loans exceeded 1 trillion yuan.

Medium- and long-term loans accounted for more than half of the new bank credit in March. These loans, unlike much short-term borrowing, would help the real economy to recover, said analysts.

The monetary policy committee of the People's Bank of China, or the central bank, said at its first-quarter meeting that it would continue to pursue an "appropriately easy monetary policy" in coming months to boost investor confidence.

The central bank has cut interest rates five times and reduced banks' required reserve ratio four times since September.

Zuo Xiaolei, chief economist with Galaxy Securities, said there would be no interest rate cuts in the short term, because investment was not being affected by the cost of credit but investor confidence.

That view was supported by Wang Xiaoguang, an economist with the National Development and Reform Commission, the country's top economic planner. He said the declines in the CPI and PPI didn't indicate that there was a deflation problem in China, and it wouldn't be necessary to cut interest rates further in the short run.

Has economy bottomed out?

Economic growth in China, although slower than for many years, still stands in sharp contrast with recessions in other major economies. The Organization for Economic Cooperation and Development predicts 6.3 percent growth for China this year, compared with a 4-percent contraction in the United States and a 6.6-percent decline in Japan.

The latest World Bank forecast for China's 2009 GDP growth was 6.5 percent.

Chinese economists, however, are confident the country will realize its 8-percent target for this year, although they admitted that would depend partly on whether demand in major trading partners recovers.

Despite uncertainties, the country will achieve its GDP goal as the economy has strong fundamentals and potential to grow. If the government is not satisfied with the second-quarter performance, it will probably apply further fiscal stimulus, said Jia Kang, a researcher with the Ministry of Finance.

Possible new measures included increased spending on rural development and agricultural production, he said.

Zhang Yaxiong, a researcher at the State Information Center, said he was skeptical about the potential for medium-term growth, because the government still needed to do more to boost consumption.

An analyst with CITIC Securities, who asked not to be identified, said the economy had shown signs of reaching or approaching the bottom, but it was too early to decide what had happened until the second-quarter figures were released.

"Some first-quarter figures are positive signs, but [they] only indicate the pace of contraction is slowing." he said.

(Xinhua News Agency April 17, 2009)