China to Scrutinize Stock Gains Without Capping Loans

Discussion in 'Wall St. News' started by ASusilovic, Aug 7, 2009.

  1. Aug. 7 (Bloomberg) -- Chinese officials said they will scrutinize gains in stock prices without capping new lending after a record $1.1 trillion of loans in the first half added to credit risks and threatened to cause asset bubbles.

    The government wants stock-market stability and is studying share-price rises, Vice Finance Minister Ding Xuedong said at a press briefing in Beijing today. The People’s Bank of China has a range of tools to limit money supply, Su Ning, a deputy governor of the central bank, told the briefing.

    The Shanghai Composite Index has rallied 79 percent in 2009 and real-estate prices have rebounded, fueling concern that loans meant for infrastructure projects are being used for speculation. The government wants to cool asset markets without derailing the recovery of the world’s third-biggest economy, which grew 7.9 percent in the second quarter from a year earlier.

    Ding and Su’s comments show the key factor in policy decisions is “economic indicators, not asset markets,” said Gabriel Gondard, a portfolio manager at Fortune SGAM Fund Management Co. in Shanghai, which oversees about $7.2 billion. “Investors could read that as meaning liquidity levels will remain high, at least for now.”

    Seems, the Chinese WANT to learn about asset bubbles...