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Putting too many eggs in one basket is not good for the economy

By Zhu Qiwen | China Daily | Updated: 2016-09-29 08:33

The official inclusion of the yuan as a reserve currency by the International Monetary Fund on Saturday will be mainly of symbolic importance for now. It is a long overdue recognition of the rise of the yuan, powered by the remarkable growth of the Chinese economy over the past more than three decades.

However, for the yuan to play its greater international role, of substantially helping global trade and facilitating cross-border investment in the future, Chinese policymakers must take preemptive measures to avoid periods of extreme volatility that could plague the world's second-largest economy and engine for global growth.

Therefore, intensifying concerns over the health of the housing markets in big cities should prompt policymakers to thoroughly analyze how safe is the property sector, for it has been absorbing huge amounts of financial resources and thus affecting China's broad economic growth. It is shocking to know that almost all Chinese banks' new loans in July went to the real estate sector at a time when the overall economy is suffering from a slowdown. Even the August data that the property sector consumed about half of increase in bank loans cannot be justified by assuming that it alone can contribute up to one-fifth of the country's GDP growth.

Putting too many eggs in one basket is not good for the economy

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