The Chinese Government announced in early 2012 that the country would continue implementing the proactive fiscal policy and prudent monetary policy to support a steady and relatively fast economic growth. On August 2, the People's Bank of China, China's central bank, released the Report on the Implementation of Monetary Policies in Q2 2012, showing the policies' effectiveness.

 During the first half of 2012, the central bank intensified its efforts to fine-tune the monetary policy, make full play of the leverage function of interest rates, maintain the appropriate growth of monetary credit and sustain a reasonable scale of social financing.

 Outstanding loans from financial institutions had totaled 63.3 trillion yuan ($9.95 trillion) by the end of June, up 15.9 percent year on year and 0.4 percentage point higher than the end of last quarter.

 However, a housing price rebound appeared as the economy cooled, complicating matters for the next phase of the policy. A slowing economy needs to be spurred by a loose monetary policy. However, injecting liquidity into the market will water down the macro-control efforts in the real estate sector.

 Right now, the central bank's stance is to support the real economy, keep overall price levels stable, and maintain a steady yet relatively fast economic growth.

The need for stimulus

Since the financial crisis in 2008, most of the world's economies have taken a loose monetary policy. China was no exception.

 The country launched a 4-trillion-yuan ($635-billion) stimulus package for economic recovery. However, since the second half of 2010, the country has been tightening its monetary policy in a bid to fight inflation, and its economic growth slipped from 9.8 percent in the fourth quarter of 2010 to 7.6 percent in the second quarter of 2012. Questions have been raised among economists on whether more stimulus is needed.

 "There is no need to further loosen the monetary policy or adopt new stimulus policies," said Fan Jianping, Director of the Department of Economic Forecasting of the State Information Center.

 "Positive changes took place in two major fields that have vital impact on the Chinese economy. First, investment in infrastructure construction reversed its declining trend which was caused by obstacles in local government financing and began increasing in the second quarter of 2012. Second, housing sales increased from the previous month in July, helping reduce the negative influence of the property market on economic growth. Both changes can offer momentum for China's economic recovery," Fan said.

 Slowed economic growth is closely related to the Central Government's macro-control mindset. The Chinese Government prefers a healthier economy and plans to steer the economy away from high-polluting and energy-depleting industries through structural adjustment. China is now encouraging hi-tech and high value-added industries to take off. Strategic emerging industries have become key components in the government's support and subsidy plans.

 The National Development and Reform Commission is determined to make the proportion of strategic emerging industries against the GDP rise to 8 percent by 2015 and 15 percent by 2020 from less than 4 percent in 2010. It will make strategic emerging industries a major driving force for China's economic development, said Fan.