But problems have come to light under today's currency policy. The government should handle that policy wisely, and banks should take new approaches to lending.

There is much good news. Given companies' better credit, banks have accelerated the loans approved this year, especially to real estate projects. This lending has helped the building material sector and jazzed up the overall economy.

Credit from January to May this year increased by 181.4 billion yuan (US$21.9 billion) over the same period of last year. Real estate lending rose 24 billion yuan (US$2.9 billion).

Boosted by more input in the real estate sector, sales of building materials, such as steel, cement and building equipment also improved during that period.

Also from January to May, the net increase in corporate deposits was 196 billion yuan (US$22.8 billion), up by 8.4 billion yuan (US$1.0 billion) over the first five months of 1999.

Growth in corporate economic returns has contributed to this increase. Short-term credit for businesses increased 269 billion yuan (US$32.4 billion) from January to May, up 119 per cent over the same period of last year.

When a company gets a loan, the amount is recorded in its account. That money can be used to bring more money - credit or production returns - to the firm.

For this reason, there is ample currency in circulation. It increased by 22.3 per cent from January to May, 9 percentage points higher over this period of last year.

Meanwhile, the increase in individual saving deposits has dropped.

The central bank has cut the interest rates on individual saving deposits. The cuts have helped ease the interest burden on companies and boosted consumer credit.

The Keynesian theory says that when interest rates are low, people have money and are reluctant to deposit it, although they may not have a purchasing agenda. This use of money is common among farmers and low-income urban families.

China's new rule requiring bank depositors to use their real names has also squeezed some money out of the banks. The stock market has taken away more.

Overall net deposits from January to May increased by 284 billion yuan (US$34.2 billion) compared to the end of last year. The increase slumped by 49 per cent year on year.

These trends give the government much to consider. If the banks limit the money supply, an undersupply of money will affect the growth of industry and commerce. If too lax a monetary policy is adopted, however, an oversupply could cause businesses to duplicate one another's projects.

To boost the economy and stimulate the consumer market, China has adopted a low-interest policy and continually increased credit. But financial planners should be cautious of financial risk, as the banking sector is far from mature.

To boost consumer credit, the central bank should lower consumer credit interest rates and extend pay-off terms. Commercial banks should make it easier to apply for credit and give more loans for education, cars and durable goods.

Commercial banks must also improve services to guarantee orderly credit.

Rural co-operative lenders should give priority to farmers who want fertilizer, farming equipment, housing and education.

Ways should also be found to overcome delays in implementing the central bank monetary policies.

Money currently in circulation should be kept active. And we should try to bring deposited capital into circulation.

(China Daily staff Li Enqiang)