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Uphill battle ahead

(China Daily)
Updated: 2009-03-07 14:01

If the fall of global financial markets on Thursday has anything to do with the absence of an expanded stimulus plan in the government report Chinese Premier Wen Jiabao delivered, investors should pay attention when top economic officials elaborate on China's response to the global financial crisis.

"We have seen some positive signs including recovery of export growth," Zhang Ping, chairman of the National Development and Reform Commission, the country's planning body, said at a news conference yesterday. "It really depends on the changing situation to determine whether we need additional investment."

This remark is particularly reassuring since it shows that anti-crisis policies and measures the Chinese government has adopted have begun to take effect. More importantly, policymakers remain on high alert against worsening global conditions and are ready to react accordingly. Such constant vigilance is essential to China's fight against the economic downturn that may even hit harder than expected.

China's economy cooled to a seven-year low of 9 percent last year as the global financial crisis took its toll on the world's third largest economy.

In view of its need for sound and relatively fast economic growth to increase employment for both urban and rural residents, increase people's incomes and ensure social stability, the authorities have decided to target an 8-percent growth for the fifth year in a row in 2009.

To achieve the target, the government has vowed to significantly expand its spending. Preliminary provisions for the central and local budgets indicate that the total national revenue should reach 6.6 trillion yuan ($965 billion), an increase of 8 percent, and total national debt should reach 7.6 trillion yuan, an increase of 22 percent.

For outsiders, who are pinning their hopes on the Chinese economy to pull the world out of the recession by reviving its own growth and demand for imports, they may feel disappointed that Premier Wen did not come up with a bigger stimulus package than the 4-trillion-yuan one announced later last year.

However, early signs of a possible recovery like a three-month rebound of purchasing managers' index from a low of 38.8 in November, to 49 in February indicate that the country's anti-crisis measures are working well.

It is far too early to judge if the Chinese economy has seen the worst of the downturn amid the deepening global slowdown.

By saving an extra fiscal stimulus for the moment, Chinese policymakers are actually bracing themselves for any undesirable situation that would otherwise take them by surprise.