CHINA cannot rely on loose credit to lift its economy, Premier Li Keqiang said Monday, adding that it is difficult for the country to avoid short-term fluctuations in growth.

    Speaking at a forum in China’s northern city of Tianjin, Li obliquely referred to a surprising slump in China’s credit supply in July by saying that the data remained within a “reasonable range” despite its recent volatility. Media reports of his speaking were seen yesterday.

    A broad measure of liquidity in China’s economy, also known as total social financing, or TSF, unexpectedly tumbled to a six-year low in July, alarming global investors already worried about the country’s cloudy growth outlook.

    Li assured the audience that China’s economy could grow by around 7.5 percent this year as targeted by the government, but reiterated the Central Government’s view that a healthy job market was more important than delivering a certain level of economic growth.

    “There is already a lot of money in the pool. We cannot rely again on increasing the supply of currency to stimulate economic growth,” Li said.

    “As of the end of August, the broad M2 money supply was only up 12.6 percent compared with a year earlier,” he said. Xinhua had reported Li as saying M2 money supply grew 12.8 percent in the period. It was not immediately clear which figure was right.

    A 12.6 percent rise would be the weakest pace in five months. China is set to release its credit data for August between today and Monday.

    Like policymakers around the world, China has fallen back on looser credit supply in recent years to bolster its economy.

    In the aftermath of the 2008/09 global financial crisis, China’s M2 money supply rose an average 24 percent every month in 2009 and 2010.

    Li said China had kept its monetary policy stable and would continue to make only “targeted adjustments.”

    “Since last year, China has implemented stable and prudent monetary policies,” Li said. “We have not relied on strong stimulus to push economic development along.”

    Instead, he said authorities had counted on enacting reforms to drive the world’s second-biggest economy and would continue to pursue currency and interest rate reforms.

    Chinese policymakers have consistently described China’s policy as being “prudent” in recent years even when they are hiking or lowering interest rates.

    Since April, authorities have publicly loosened policy in modest steps by accelerating some infrastructure works, injecting cash into banks to increase lending and relaxing controls in the housing market to boost property sales.

    The reserve requirement ratio (RRR), or the amount of deposits that banks have to set aside as reserves, was also lowered for select unnamed banks.

    China’s economy has had a bumpy ride this year. Growth rebounded slightly in the second quarter from an 18-month low thanks to a stream of government stimulus measures, but hopes that the recovery would gain traction were dashed in July when data showed activity was fizzling again.(SD-Agencies)