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China Daily Website

No new plan for large stimulus: Xinhua

Updated: 2012-05-30 14:50
( Agencies)

China's State-run Xinhua News Agency said the nation has no plan to introduce stimulus measures to support growth on the scale unleashed during the global credit crisis in 2008, Bloomberg reported.

"The Chinese government's intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth," Xinhua said on May 29 in an article on economic policy, without attributing the information. "Current efforts for stabilizing growth will not repeat the old way of three years ago." In 2008, policy makers unveiled a fiscal stimulus of 4 trillion yuan ($586 billion at the time).

China stocks fell as the report damped speculation of government policy action spurred by Premier Wen Jiabao's call last week for a greater focus on growth. Stimulus restraint may reflect concern that the record lending boom that helped the nation weather a contraction in trade in 2008-2009 raised risks of a bad-loan crisis.

"They have to strike a delicate balance between doing something to stabilize growth and not overshooting," Bloomberg's report said, citing Shen Jianguang, Hong Kong-based chief Asia economist for Mizuho Securities Asia Ltd, who previously worked for the International Monetary Fund and European Central Bank.

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 wasn't labeled as opinion or commentary.

Pumping in government money to achieve growth targets is "not sustainable" and China will instead focus on encouraging private investments in railways, infrastructure, energy, telecommunications, health care and education, the story said.

The National Development and Reform Commission (NDRC) may be accelerating construction approvals as part of China's response, with the planning agency last week saying that Baosteel Group Corp and Wuhan Iron & Steel Group won permission to build 134 billion yuan ($21 billion) of new factories. The NDRC had delayed approving the two steel projects in 2009, citing industry overcapacity.

Agencies including the finance ministry, agriculture ministry and the securities regulator will introduce their own measures to stabilize growth, Xinhua said.

The nation has sped up the approval process for major projects, Xinhua said May 28. The country will also encourage greater private investment in banks, according to guidelines released by the China Banking Regulatory Commission in a statement posted on its website May 26.

The People's Bank of China on May 12 lowered banks' reserve ratios by 50 basis points, the third cut in six months.

"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 Co in Beijing. Bank lending will play a smaller role in the new round of investment, he said.