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China Should End Monetary Stimulus, Aberdeen Says

Nov. 5 (Bloomberg) — China should withdraw its monetary stimulus to correct “imbalances” in the economy and avoid bad loans from surging among the nation’s banks, said Aberdeen Asset Management Co., which manages $40 billion in Asian equities.

“The government is stimulating the economy through the banks,” Nicholas Yeo, head of Hong Kong and China equities, said in an interview at Bloomberg headquarters in New York. “When the government exits its stimulus program, you may see more nonperforming loans. It may take three to five years. I think they should withdraw stimulus but they won’t because they need to keep the economy going.”

The World Bank said yesterday China’s policy makers must avert stock and property market bubbles after lending swelled to a record $1.27 trillion this year. China will need to do more to rebalance the economy toward consumption and services and away from investment and industry, Beijing-based World Bank senior economist Louis Kuijs said.

The Shanghai Composite Index has surged 72 percent this year after Chinese authorities enacted a $586 billion stimulus plan, lowered banks’ cash reserve requirements and reduced the one-year lending rate to a five-year low. China’s new lending tripled to 7.37 trillion yuan in the first half from a year earlier as the government eased restrictions to help boost the economy, which rebounded to grow 8.9 percent last quarter.

China plans to tighten rules on personal loans to prevent them from being used for speculation, the China Banking Regulatory Commission said on Oct. 28. Personal consumer loans, many of which are mortgages, surged 151 percent from a year earlier to 650.8 billion yuan in the first half, the regulator said in a statement.

via China Should End Monetary Stimulus, Aberdeen Says (Update1) – Bloomberg.com.

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