Govern­ment won’t re­sort to short-term stim­u­lus, Li says

Growth un­der 7.5% ac­cept­able so long as ad­e­quate em­ploy­ment ex­ists

China Daily (Canada) - - BUSINESS - By WEI TIAN in Shang­hai and JIANG XUEQING in Boao, Hainan

Pre­mier Li Ke­qiang on Thurs­day dis­missed spec­u­la­tion of ma­jor pol­icy eas­ing amid the cur­rent eco­nomic slow­down, say­ing the govern­ment will not opt for a mas­sive short-term stim­u­lus be­cause of “tem­po­rary” vo­latil­ity.

“A growth rate un­der this year’s 7.5 per­cent tar­get is ac­cept­able so long as suf­fi­cient em­ploy­ment is en­sured,” the pre­mier told guests at the open­ing cer­e­mony of the 2014 an­nual con­fer­ence of the Boao Fo­rum for Asia in Hainan prov­ince.

“We will fo­cus more on medium- to long-term healthy de­vel­op­ment,” Li said, adding that China has enough op­tions to re­spond to any risk and chal­lenges and is ca­pa­ble of main­tain­ing eco­nomic growth at a rea­son­able level.

Stream­lin­ing ad­min­is­tra­tion and fur­ther tax re­forms are two of the op­tions on the agenda, said Li.

The world’s sec­ond-largest econ­omy was ex­pected to ex­pand by about 7.3 per­cent in the first quar­ter of the year, down from 7.7 per­cent re­ported in the pre­vi­ous quar­ter. It will be the weak­est since early 2009, ac­cord­ing to a sur­vey of 21 econ­o­mists by China Busi­ness News. Fi­nal data will be out onWed­nes­day.

Li’s re­marks eased the con­cerns of some econ­o­mists that the au­thor­i­ties may again opt for a mas­sive stim­u­lus pack­age sim­i­lar to the 4 tril­lion yuan ($645 bil­lion) in­vest­ment pro­gram in 2008, which pushed up as­set prices and re­sulted in se­vere over­ca­pac­ity.

Car­los Gu­tier­rez, chair­man of Al­bright Stone­bridge Group based in Wash­ing­ton DC, said on the side­lines of the fo­rum that Pre­mier Li’s speech gave “a very clear vi­sion of where he wants China to go”.

“It was clear, strong and vi­sion­ary,” Gu­tier­rez said. He agreed with Li on not tak­ing strong mea­sures to stim­u­late the econ­omy de­spite the fact it is slow­ing down.

“Be­ing steady is more im­por­tant than do­ing some­thing fast. I think the strat­egy is right,” he said.

“The stim­u­lus (in 2008) brought struc­tural dam­age to the Chi­nese econ­omy. We are still try­ing to re­verse it,” Chen Zhiwu, a pro­fes­sor of fi­nance at YaleUniver­sity, said dur­ing the Boao Fo­rum.

“Mas­sive stim­u­lus is the last thing China needs at the mo­ment,” said Liu Huang­song, di­rec­tor of the In­sti­tute of Eco­nom­ics at the Shang­hai Academy of So­cial Sci­ences.

Al­though he es­ti­mated gross do­mes­tic prod­uct growth will de­cline fur­ther in the sec­ond quar­ter, maybe to be­low 7 per­cent if the govern­ment

It was clear, strong and vi­sion­ary. Be­ing steady is more im­por­tant than do­ing some­thing fast. I think the strat­egy is right.” CAR­LOS GU­TIER­REZ CHAIR­MAN, AL­BRIGHT STONE­BRIDGE GROUP

does not roll out any sup­port­ing poli­cies, Liu said un­em­ploy­ment will not be a ma­jor prob­lem.

“Be­cause of the di­min­ish­ing de­mo­graphic bonus, China’s la­bor force de­clined by 2.2 mil­lion in 2013.

“Loos­en­ing the sec­ond­child pol­icy means there will be many fe­male work­ers on ma­ter­nity leave and more de­mand for nurs­ing jobs,” he said.

Al­though a mas­sive stim­u­lus pack­age is not in sight, some econ­o­mists said pol­icy “fine-tun­ing” is needed to pre­vent a hard land­ing for the econ­omy.

Xu Gao, chief macroe­co­nomic an­a­lyst at Ever­bright Se­cu­ri­ties Co Ltd, said any fine-tun­ing may in­clude faster ap­proval of in­fra­struc­ture projects and can­cel­ing reg­u­la­tions re­lat­ing to the property mar­ket in cities where there is down­ward pres­sure on home prices.

Mean­while, both Xu and Liu es­ti­mated there is room for the People’s Bank of China, the cen­tral bank, to cut the bank re­serve ra­tio once or twice this year to re­lease more liq­uid­ity and sup­port growth.

“Af­ter all, a sta­ble growth rate is needed for im­ple­ment­ing re­forms,” Xu said. Zhao Yinan in Boao con­trib­uted to this story. Con­tact the writ­ers at weitian@chi­nadaily. com.cn and jiangx­ue­qing@ chi­nadaily.com.cn

WU ZHIYI / CHINA DAILY

Pre­mier Li Ke­qiang de­liv­ers a key­note speech at the open­ing of the 2014 an­nual con­fer­ence of the Boao Fo­rum for Asia in Hainan prov­ince on Thurs­day.

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