China premier warns against loose money policies

China premier warns against loose money policies

BEIJING - China needs to sustain economic growth of 7.2 per cent to ensure a stable job market, Premier Li Keqiang said as he warned the government against further expanding already loose money policies.

In one of the few occasions when a top official has specified the minimum level of growth needed for employment, Li said calculations show China's economy must grow 7.2 per cent annually to create 10 million jobs a year.

That would cap the urban unemployment rate at around 4 per cent, he said.

"We want to stabilize economic growth because we need to guarantee employment essentially," Li was quoted by the Workers' Daily as saying on Monday. His remarks were made at a union meeting two weeks ago but were only published in full this week, just days before a pivotal Communist Party plenum to set policy opens.

Yet even as authorities keep an eye on growth, Li sounded a warning on easy credit supply, which he said had topped 100 trillion yuan (S$20.4 trillion) in the world's second-biggest economy.

"Our outstanding M2 money supply has at the end of March exceeded 100 trillion yuan, and that is already twice the size of our gross domestic product (GDP)," Li was quoting as saying.

"In other words, there is already a lot of money in the 'pool'; to print more money may lead to inflation."

His comments echoed the government's hawkish stance on inflation, analysts said, and were separately affirmed on Tuesday by the central bank, which promised to keep policy prudent with appropriate fine-tuning as well as to "resolutely repress" property speculation.

Still, Li's remarks underscore the fine line China must walk to create economic growth and jobs for social stability, while guarding against excesses that may hurt itself in the long run.

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