Growing worries about recovery momentum

The significantly increased volatility that China's stock markets witnessed last week underlined intensifying suspicion among investors that some stimulus measures like a loose monetary policy may have been implemented too successfully for these to succeed in the coming quarters.

If Chinese policymakers insist that a proactive fiscal policy and moderately easy monetary policy are crucial for sustained growth, they should work hard to convince the market of the sustainability of counter-crisis measures and thus the ongoing rebound.

Otherwise, hopes of a strong and sustained revival in the Chinese economy will be questioned amid growing fears over an about-face on credit supply. The benchmark Shanghai Composite Index plunged by nearly 8 percent at one point last Wednesday amid concerns over alleged government attempts to rein in a surge in bank lending, which has helped to push the index up by over 80 percent this year.