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Vigilant of an "artificial bull-market" induced by credit capital
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15:42, July 13, 2009

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The capital fluidity triggered by the rapid increase of new credit across China in the first half of 2009 added more risks to the overall recovery of the financial system and macro-economy.

The securities market achieved an upward trend despite the lack of strong support to the real economy. Amid this backdrop, one cannot exclude the possibility that some credit capital has entered the stock market. This will send a wrong signal to the decision-making authorities concerning macro-economic policies.

Various Renminbi loans in June increased by 1.53 trillion yuan month-on-month and China's new loans had amounted to nearly 7.4 trillion yuan in the first half of 2009.

A number of economic indices in the second quarter were better than expected, which seemed to indicate that the overall macro-economic situation had improved, according to Zhong Maochu, a professor from the Institute of Economic Studies at Nankai University. However, judging from historical experiences, a financial crisis on such a large scale usually involves a relatively long period of decline or depression; therefore, one cannot be overoptimistic about China's economic recovery.

Credit capital flocking into the stock market will lead the securities market to show false signs of a booming market. These false signs in turn may have fatal influences on the recovery of the macro-economy.

By People's Daily Online

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