Professor takes the hard line on credit
A TOP economist from the State Council's think-tank said yesterday China should not relax credit to solve state enterprises' problems.
Once the credit crunch was relaxed, inflation would soar and 'triangular' debts among state firms would increase, said Professor Wu Jinglian of the Development Research Centre.
Professor Wu, well-known for his support for a market economy, told an international conference on China's economic reforms in Hong Kong that the current money supply was adequate.
He said statistics indicated there was no shortage of credit in China.
These included the annual 30 to 40 per cent growth in money supply, a yearly increase of around 35 per cent in deposits by state enterprises, an average rise of 10 per cent in gross national product and an estimated 300 billion yuan (HK$279 billion) in floating capital in the markets.
The production capital shortage faced by enterprises was mainly due to problems of resource distribution and allocation, rather than a credit squeeze, he said.
Professor Wu said a large amount of capital had been absorbed by the real estate and overseas markets, which had reduced the amount of capital available.
He said the state should adjust its capital distribution system so capital could go where it is most needed.
The economist said administrative measures could be used to ensure capital flowed to needy enterprises and sectors because China had yet to establish a fully fledged market economy.
The professor said the state may use interest rates to channel the flow of capital.
On national economic development, he said the growth rate was too high and should be cooled.
'And, if the growth goes to the real estate and stock markets, then, as an ordinary citizen, I beg you, no. We can't stand that,' he said.
To solve the national economic problems, he said banking and state enterprise reforms should be carried out in tandem.
'The greatest obstacle to their implementation is lots of vested interests,' he said.
He stressed the Government should use various measures to make sure everybody complied with central decisions.
He said he was confident obstacles would be removed.