China must be getting very, very worried that people might be getting the wrong idea about its economic policy and the recovery generated by the $US585 billion in stimulus spending.

The country’s second most powerful leader, Premier Wen Jiabao, has been forced to issue a statement stating no change in monetary policy is going to happen.

His statement yesterday was the third in two days and follows a series of similar statements in the past three weeks that Chinese investors and the markets have ignored.

It’s a sign of just how fraught Chinese sentiment remains. Despite all the assurances, China’s stockmarket fell 4.4 per cent last week — its biggest fall for five months — as investors became convinced that a tightening in lending was happening. It sent jitters through other markets in the region as well.

Premier Wen’s statement will be warmly received in Australia and other countries in the Asian region that have seen their recent economic growth improve off the back of the huge Chinese stimulus.

His statement came ahead of this week’s flow of monthly economic data for July and was issued while “on a three day trip visit through China”.

“The reason that we are sticking to the proactive fiscal policy and moderately loose monetary policy is because we are facing many difficulties and challenges,” Wen said.

He said the effects of some of China’s stimulus policies will weaken over time, and the economy is still under pressure from declining demand for exports.

“We are persisting with implementing active fiscal policies and appropriately relaxed monetary policies because we still face many hardships and challenges, the international economic outlook remains unclear, and pressure from falling external demand remains heavy.

The impetus for self-sustaining growth in the economy is still not strong … therefore, the direction of macro-economic policy cannot change.”

Three times last week, Chinese Government officials and the central bank, tried to assure markets and others that there had been no change in monetary policy.

The week before there were a couple of comments in a similar vein, in July and June there were at least six which focused on the need for more targeted lending, but which insisted the current relaxed monetary policy would not be altered by lending curbs, rate rises or changes to reserve asset ratios.

One of last week’s assuring statements came on Friday after the local stockmarket had closed following a fall that helped take Asian markets down 1 per cent on the day.

That was after reports of one big bank curtailing loans this half, stories of a change in official policy saw Chinese markets fall.

Bloomberg quoted Zhang Jianguo, president of China Construction Bank, as saying in an interview on Thursday that the bank would cut lending by about 70 per cent to 200 billion Yuan in the second half to avert a surge in bad debt.

This was rightly or wrongly seen as a direct result of the small change in the way the Chinese central bank and other officials were describing the current state of monetary policy.

China’s Shanghai Composite slid 2.9 per cent to 3,260.69 Friday, for a weekly loss of 4.4 per cent after rising in the previous seven weeks.

In Hong Kong, the Hang Seng Index fell 2.5 per cent, also erasing gains made earlier in the week, on persistent fears that China may tighten lending policies, especially in the property sector, to prevent asset bubbles.

But a senior Chinese official said there could be no change in China’s macro-economic policy orientation amid the world economic downturn.

Xinhua newsagency quoted Zhu Zhixin, vice minister of the National Development and Reform Commission (NDRC), as saying at a State Council Information Office conference, that the overseas market was still severe and the country’s economic policy direction will remain unchanged.

“Although the country’s economy has shown signs of recovery, it still faces of many difficulties in maintaining stability, he said.

“Any change in the macro-economic policy would disturb the recovery or rebound momentum, or even perish the previous efforts and achievements,” he said.

“Efforts to keep a stable and fast economic development is the top priority of the country in the second half.”