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SINGAPORE: China's strong economic growth is unlikely to result in an asset price bubble, according to Standard Chartered Bank.
But Michael Rees, its wholesale banking head, has warned that much needs to be done to ensure that growth in China and Asia will not be derailed. And this will include careful management of the recovery and stimulus withdrawal, which he said, will be the most difficult task ahead.
China has continued to grow strongly through the downturn. With its GDP growing some 8.7 per cent on-year in 2009, there have been fears that the Asian giant is overheating.
But StanChart said this is unlikely, given the early steps taken by China to curb excess liquidity.
Mr Rees said: "If you look back to last year, they already started embarking on that with reining in bank lending.
"They have had a second wave of measures, the reason for that becoming apparent with that quarter-four numbers. And I think we should expect to see a series of changes continue to happen as they try to get the fine balance."
But StanChart said market players should not take China's resilience for granted, as marshalling an economy of that scale is not an easy task. It said Asia's policy makers should also target for sustainable growth, free of cash stimulus.
Mr Rees said: "The challenge they have got is how they fine tune that to bring it back a more normal level of growth, rather than as a response to a crisis situation - particularly in an environment where recovery in the West may be longer and more drawn out than is anticipated."
If all goes well, StanChart said clear signs of a sustained Asian recovery should become apparent by the third or fourth quarter of this year, as the data from the first half trickles in and sets the tone for policy reaction in the later part of the year.
StanChart also added its voice to a growing view that Asia's economies are likely to stabilise much faster than those in the West.
- CNA/sc
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