China in the ‘slow’ lane
Page 6 Life in Beijing’s shopping malls and restaurants is buzzing, but beneath the surface, signs of a steady slowdown are emerging, Kobus van der Wath writes in our new weekly Letter from China.
CHINA has no plan to introduce stimulus measures on the scale deployed during the global financial crisis to counter this year’s economic slowdown, the official Xinhua News Agency reported yesterday.
“The Chinese government’s intention is very clear: it will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said in the seventh paragraph of an article on economic policy, without attributing the information. “The current efforts for stabilising growth will not repeat the old way of three years ago.”
Premier Wen Jiabao last week called for a greater focus on growth, spurring speculation that the country would step up measures to boost expansion that is set to slow for a sixth successive quarter. The benchmark
The Chinese government’s intention is very clear: it will not roll out another … stimulus plan to seek high economic growth
Shanghai composite index has gained 1,7% since the comments were published on May 20.
The tilt towards supporting expansion followed data showing trade below forecasts last month and industrial production rising the least since 2009. Europe’s debt crisis and austerity measures are threatening exports.
The Xinhua article made no mention of central bank tools, including interest rates and the reserve-requirement ratio, previously used to bolster growth.
It carried the byline of two reporters and was not labelled as opinion or commentary. Pumping in government money to achieve growth targets was “not sustainable” and China would instead focus on encouraging private investment in railways, infrastructure, energy, telecommunications, healthcare and education, the report said.
Agencies including the finance ministry, agriculture ministry and the securities regulator would introduce their own measures to stabilise growth, the newspaper said.
Economists at Credit Suisse Group and Standard Chartered said on Monday that stimulus was likely to be smaller than the 4-trillion-yuan ($630bn) package announced in 2008. Credit Suisse said spending on investment would probably range from 1-trillion yuan to 2-trillion yuan. Standard Chartered said China was starting a “mini-me” version of the earlier stimulus.
China’s economy is forecast to expand up to 8,2% this year, based on the median estimate of analysts. That expansion would be the least since 1999.
“Unlike in 2008, when the Chinese government rushed to spend, the new stimulus package will be small and modest,” said Zhang Xinfa, an economist with China Galaxy Securities. Bank lending would play a smaller role in the new round of investment, he said.
China’s cabinet agreed to revive financial incentives for consumers to trade in their passenger cars to help increase demand in the world’s biggest vehicle market, a government official said yesterday.
The State Council approved a cash-for-clunkers plan last week and relevant ministries were working on details, said the official, who asked not to be identified. Bloomberg