"The prudent policy will not be changed in 2003," said Xie Ping, head of the Research Bureau of PBOC.

Xie revealed at the 2002 China Information Industry Forum held in Beijing yesterday that the country plans to add 1.5 trillion yuan (US$181 billion) in commercial loans to this year's base in 2003.

China will also maintain a similar growth rate in its money supply next year, with the supply of cash, demand deposits, and checkable deposits (M1) growing by 15 per cent. The supply of M1 plus retail money market fund balances, savings deposits and small time deposits will increase by 16 per cent, according to Xie.

A stable exchange rate for renminbi next year is another expected trend in China's monetary policy, Xie said.

Gao Huiqing, a senior expert with the State Information Center, said an active monetary policy can create a favorable macro-economic environment.

"Although China may issue more State bonds next year, the proactive fiscal policy has lasted for many years and it needs the assistance of an active monetary policy," Gao said.

In spite of a projected M1 and M2 increase of about 13 per cent at the beginning of this year, the actual M1 and M2 increase rates by the end of October were already 17.9 per cent and 17 per cent. The increases became an important factor leading to higher growth in the national economy in the second half of this year than in the first half, according to Gao.

Gao also believes that although next year's growth in commercial loans might be 100 billion yuan (US$12 billion) less than this year, more foreign direct investment and the growth of capital markets will make up the difference.

In the first 10 months of this year, Chinese enterprises raised only 73.6 billion yuan (US$8.9 billion) from the stock markets, 48 billion yuan (US$5.8 billion) less than in the same period last year and accounting for only about 5 per cent of the total raised capital.

(China Daily November 30, 2002)