China's economy is showing signs of stabilizing and is at a critical phase of recovery; and it was necessary to carry on with the proactive fiscal and moderately loose monetary policies, the State Council said yesterday.
"There are increasing favorable and positive factors in the economy," according to the consensus opinion at an executive meeting of the State Council presided by Premier Wen Jiabao yesterday.
"Still, the foundation for the economy's recovery is not solid enough and there are many uncertainties," according to the conclusions of the policymakers.
China's economy has showed signs of strengthening over the past months, as investment rebounded and consumption held steady. That has been largely due to the government's 4 trillion-yuan stimulus package, which appeared to take effect after the nation's GDP growth sank to a decade low of 6.1 percent in the first quarter.
"Domestic investment, which has been stimulated by the government and financed by both fiscal funds and, more importantly, bank lending, is clearly the most important driver of the recent recovery," Wang Tao, economist with UBS Securities, wrote in a research note.
Over the past weeks, there were concerns that the government may tighten its monetary policy as the local lenders have extended more than 5.7 trillion yuan in new loans in the first five months. That's more than the total of 2008 and well above the official target of 5 trillion yuan in this year's new loans.
Top policymakers said they would maintain stable investment growth and spur consumption, trying to give domestic consumption a more important role in boosting economic growth.