China pumps it up on stim­u­lus action

Weekend Argus (Saturday Edition) - - LIFE - JOE MCDON­ALD

BEI­JING: Chi­nese leaders pledged to stick to stim­u­lus spending and easy credit to sup­port growth next year, mak­ing clear their un­ease about the sta­bil­ity of China’s nascent re­cov­ery from the global cri­sis.

End­ing a closely watched an­nual plan­ning meet­ing, the Com­mu­nist Party lead­er­ship yes­ter­day gave no sign it planned an early exit from the stim­u­lus, de­spite a re­cent up­turn in growth. But it said stim­u­lus ef­forts would shift em­pha­sis from state-led in­vest­ment to en­cour­ag­ing more con­sumer spending and pri­vate in­vest­ment.

“The mes­sage the re­port is meant to send is that the cen­tral gov­ern­ment is still not com­pletely re­lieved about the do­mes­tic and in­ter­na­tional sit­u­a­tion,” said Lu Zheng­wei, chief econ­o­mist for In­dus­trial Bank in Shang­hai.

In a state­ment car­ried by state me­dia yes­ter­day, party leaders promised to “con­tinue a proac­tive fis­cal pol­icy and a mod­er­ately easy mon­e­tary pol­icy” – a ref­er­ence to Bei­jing’s four tril­lion yuan ($586 bil­lion) stim­u­lus and lav­ish bank lend­ing.

Lu said the credit pledge would sur­prise ob­servers who ex­pected a more neu­tral stance af­ter fore­casts that China faced lit­tle threat of a sec­ond down­turn af­ter third-quar­ter growth re­bounded to 8.9 per­cent more than a year ear­lier.

Some an­a­lysts have sug­gested ma­jor economies such as China should start to con­sider when to with­draw stim­u­lus. But the manag­ing di­rec­tor of the In­ter­na­tional Mon­e­tary Fund, Do­minique StraussKahn, warned last week dur­ing a visit to Bei­jing that a global re­cov­ery was un­even and said it was es­sen­tial to “keep sup­port­ive mea­sures in place”.

The an­nual plan­ning meet­ing, usu­ally held in De­cem­ber, was moved up to Novem­ber in a pos­si­ble move to quiet un­cer­tainty about the di­rec­tion of gov­ern­ment pol­icy.

Chi­nese leaders have tried to re­as­sure the pub­lic and en­cour­age con­sumers and com­pa­nies to spend by point­ing to im­prove­ments in fac­tory out­put and other in­di­ca­tors, while also warn­ing against com­pla­cency.

The stim­u­lus is pump­ing money into the econ­omy through higher out­lays on build­ing air­ports and other pub­lic works. Pri­vate com­pa­nies that pro­vide most of China’s eco­nomic growth and new jobs were left be­hind as spending went to state-owned construction com­pa­nies and sup­pli­ers of steel and ce­ment, though money has be­gun to flow to the pri­vate sec­tor as they pay wages and buy raw ma­te­ri­als.

Chi­nese reg­u­la­tors have ex­pressed con­cern about the scale of bank lend­ing and or­dered in­sti­tu­tions this week to avoid a surge in credit. Lend­ing rose to more than one tril­lion yuan ($135 bil­lion) a month ear­lier in the year, as in­sti­tu­tions were or­dered to sup­port stim­u­lus projects, but has ta­pered off since July.

Yes­ter­day’s an­nounce­ment stressed the need to boost con­sumer spending and to en­cour­age pri­vate in­vest­ment. Au­thor­i­ties promised ear­lier that the gov­ern­ment would do more to help en­trepreneurs in the sec­ond year of the stim­u­lus. The plan also promised to pro­mote new and hi-tech in­dus­tries and to im­prove health and ed­u­ca­tion. – Sapa-AP

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