Wen urges more support for growth

By Wei Tian (China Daily) Updated: 2012-05-21 02:49

Chinese Premier Wen Jiabao (C, front) listens to a staff member's introduction during a visit to Wuhan Iron and Steel (Group) Corp. in Wuhan, capital of Central China's Hubei province, May 18, 2012. Wen Jiabao made an inspection tour to Wuhan from May 18 to 20, during which he also presided over a seminar on the economic situation of the six provinces of Hebei, Liaoning, Jiangsu, Hubei, Guangdong and Shaanxi. [Photo/Xinhua]

Exports rose by 4.9 percent in April, barely half the rate which economists had forecast, while imports fell far short of expectations. In addition, foreign direct investment slid lower in the first four months of 2012.

To make matters worse, fixed asset investment growth reported its slowest pace in a decade.

"The premier's words came at a vital time, and have sent a strong signal of further policy easing," said Lu Zhengwei, chief economist with the Industrial Bank.

"If the economic slowdown in the first quarter was still acceptable, as part of efforts to tackle inflation, further economic downturn will cause concerns for the authorities," Lu said.

He stressed that although Wen's comments were mostly reiterating previous policies they will undoubtedly help boost confidence in the economy.

Wen said China will continue implementing structural tax cuts and replace sales tax with value-added tax.

Loans to key projects will be increased and credit support boosted for small and medium-sized enterprises, he said.

Banks issued 681.8 billion yuan ($108 billion) in new loans in April, nearly one third less compared to that for the previous month, according to the People's Bank of China.

Although the bank has again cut reserve requirements for lenders in a bid to free up more liquidity in the market, Lu said a key measure would be to increase the loan-to-deposit ratio, the amount of deposits allowed for lending.

A declining deposit base was the main reason for less credit, he said.