The benchmark Shanghai Composite Index broke the psychologically important
barrier of 4,000 points on Wednesday, less than two months after surpassing the
The sharp gains are once again raising worries about bubbles developing in
the equity market.
If negative real interest rates are left un-checked, the sustainable
development of the market will be in jeopardy, Goldman Sachs warned last week.
"To ensure the sustainability of the market over the medium term, we believe
policy makers need to act quickly," economist Hong Liang of the investment bank
"Delays in policy actions will run the risks of severely impairing
households' balance sheets, exacerbating income and wealth distribution, and
setting back years of progress made on capital market reform."
Furthermore, banks extended 422 billion yuan in new loans in April, bringing
the amount for the first four months to 1.85 trillion yuan - more than half the
total for the whole of 2006.
In April, the broad measure of money supply - M2 -- slowed down to 17.1
percent from 17.3 in the previous month, the central bank said.
However, the M2 growth still remained well above the People's Bank of China's
full-year target of 16 percent.
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