Bloomberg quoted Premier Mr Wen Jiabao said promoting investment growth is the key now to stabilizing China economic expansion and signalling officials may boost spending to counter a slowdown that probably extended into a sixth quarter.
Mr Wen said stabilizing economic growth is not only a pressing priority for China now and it is also a long term arduous task. He said that “Growth-stabilizing policies include boosting consumption and diversifying exports, but currently what is important is to promote a reasonable growth in investment.”
China expansion is cooling as Europe debt turmoil reduces exports and Mr Wen’s prolonged crackdown on property speculation restrains domestic demand. Growth may have slid to 7.7% in the second quarter.
Mr Zhang Zhiwei Hong Kong based chief China economist at Nomura Holdings Inc who previously worked for the International Monetary Fund said “Public investment will likely go up in coming months. It is the most effective way and likely the only effective way to push up growth in the short term. Interest rate cuts help yet take time to filter through the economy.”
The statement builds on remarks reported by the official Xinhua News Agency two days earlier where Mr Wen said during an inspection tour in the eastern province of Jiangsu that stabilizing investment currently plays a key role in expanding domestic demand and maintaining growth. The government will intensify fine-tuning of policies.
1. Stocks Fall
The Shanghai Composite Index fell for a third day and was down 0.2% at the 11:30 AM local time break. The MSCI Asia Pacific Index declined 0.2% the fifth straight drop.
Mr Wen said China needs to keep a certain level of economic growth to provide foundations for economic and social development and improving people livelihoods, which summarized discussions with economists and company executives held July 9-10.
Mr Wen didn’t specify what level of growth is necessary. In March, he set a target of 7.5% for gross domestic product expansion this year and the first time since 2004 the government had a goal below 8%. Annual targets are routinely surpassed and are more indicative of the direction of policy. Growth last year of 9.2% compared with the 8% goal.
The premier said recently that when promoting investment, greater importance should be given to the destination, structure, quality and cost-effectiveness of spending. He also called for more support for emerging industries and new technology research and development.
2. Stimulus Measures
Xinhua reported in May that China has no plan to introduce stimulus measures to support growth on the scale unleashed during the depths of the global credit crisis in 2008. At the same time, China has in recent weeks accelerated approvals for projects including clean energy and lower-polluting steel mills.
Customs bureau data showed China imports rose less than estimated in June while export growth slowed. A statistics bureau report the day before showed consumer inflation eased to 29 month low last month. The government is set to release figures July 13 for second-quarter gross domestic product, investment and industrial production.
Mr Wen said “The domestic and external economic situations are relatively complicated. He cited downward pressure on the economy, after being quoted July 8 as saying the pressure is still relatively large.”
Source - Bloomberg
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