CHINA will not relax its macroeconomic credit-control policy next year because the country's money supply growth remains at a high level, a Hongkong Bank economist says. Benny Chiu, research manager of Hongkong Bank China Service, said tighter credit controls might be needed if the mainland wanted to achieve single-digit inflation and keep M2 supply growth in line with gross domestic product growth (GDP) and inflation. M2 represents money in circulation and non-interest-bearing bank deposits, building society deposits and national savings accounts. Mr Chiu said he saw no indications from China that the two-year-old credit control policy would be relaxed next year, or even in the next few years. 'In fact, the fast growing pace of M2 supply this year showed that money supply was not reduced by the austerity policy,' he said. He said M2 supply in the third quarter of this year grew 30.6 per cent year-on-year. In the second quarter, it rose 33 per cent. Mr Chiu said China's state deficit remained high. Credit control by the central bank was a common means of reducing deficits in Western countries, he said. Mr Chiu said tighter credit controls would have to be adopted if the mainland government wanted to meet its target of developing a market-driven economy. He quoted Dai Xianglong, governor of the People's Bank of China, as saying the central bank's target was to control its M2 supply growth at the pace of GDP growth plus inflation. China expects GDP growth of 9 per cent and inflation of 10 per cent next year. He said the government's target for M2 growth would therefore be 19 per cent. Mr Chiu said China should not and could not relax its macroeconomic credit control policy despite strong calls from within the country and from abroad for a relaxation. 'That would mean China going back to a planned-economy mechanism and all the efforts of the past two years would be undone if the government relaxed the money supply at this stage,' he said. To develop a market-driven economy, enterprises had to survive by themselves and not rely on government support, he said. Mr Chiu said the 10 per cent economic growth target set for this year by the central government was very high compared with an average growth rate of 3 per cent in the United States and 5 per cent in Hong Kong.