While the economy continues to show signs of progress, the big question is whether those gains are sustainable, Pimco CEO Mohamed El-Erian told CNBC.
Until small businesses can start getting loans, the pace of the economic recovery will be difficult to gauge, El-Erian, who helps run the world's largest bond fund, said in a live interview.
"Increasingly, what's going to matter is not just the level of growth but also the quality of growth," he said. "It has to be sustainable, it has to lead to final demand. That's what companies need in 2010, that's what the economy needs."
As more banks indicate plays to repay their Troubled Asset Relief Program funds, El-Erian said the important issue is "how quickly we should expect the banking system to start lending again."
"There are many small firms that have no access to credit now," he said. "There's a lot of segmentation going on between the big companies that have access to capital markets and the smaller companies that have access to banks and cannot get credit."
He said the markets also are concerned about sovereign countries reducing their debt loads, and cautioned against the global economy relying too much on China to go forward.
"It's not often that a low-income country is asked to take on massive global responsibilities," El-Erian said. "The Chinese are focused, understandably so, on what's right for China right now."
Addressing whether Citigroup should start repaying its government bailout funds, El-Erian said it should only do so if the company can show it can weather the commercial real estate storm and has a strong enough balance sheet to stand on its own.
As reported Thursday by CNBC, Citi may do a $15 billion stock offering to start repaying the $45 billion it took under TARP.