China should stick to its proactive fiscal policy and moderately easy monetary policy to fuel the economic growth as the foundation for recovery is not solid yet, said a Chinese economist on Wednesday.

Li Yining, a renowned economist at the Peking University in Beijing, said at a conference in Beijing that the current economic advance was pushed by investment, which was not the final demand. Stable economic recovery should be sustained by increased consumption, he added.

In the second quarter, the Chinese economy rose 7.9 percent from a year earlier, up from the 6.1 percent in the first quarter. The growth was mainly led by the fixed-asset investment backed by the government, he said.

The proactive policy should be further carried out to stimulate consumption and private investment in the following period, said Li, who is also the vice director of the Economic Commission of the Chinese People's Political Consultative Conference.

China should also continue its moderately easy monetary policy, but should also improve credit quality and structure, which should be the focus in the future, he noted.

Government data showed bank loans hit a record 7.37 trillion yuan (US$1.08 trillion) in the first half. The figure exceeded the full-year target of 5 trillion yuan.

The country's banking regulator has reiterated efforts for lenders to prevent possible financial risks posed by the surge of loans.

For falling exports which dragged down the economic growth, Li said there was little room for export rebates and it was difficult to cut cost for exports.

He suggested that China use its huge foreign exchange reserve to encourage enterprises to invest overseas, which would also help sell products to foreign countries.

China had reserves of US$2.13 trillion in June, the largest in the world.

(Xinhua News Agency July 23, 2009)