Wen urges more support for growth

Chinese Premier Wen Jiabao (2nd L) discusses with officials from six provinces during a seminar on the economic situation of the six provinces in Wuhan, capital of Central China's Hubei province, May 19, 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]

But a more effective therapy to tackle a possible economic downturn may still be investment incentives.

The premier has again encouraged more private investors to be involved in monopoly sectors.

Because of a drop in investment in infrastructure and railway projects, these two sectors, need more investment, Lu said.

Less government revenue could be good news for economic reform, as authorities will be forced to give the market more say, Lu said.

However, apart from domestic policy adjustments, "the most severe downside risk for the economy was from external demand," Wang Tao, chief China economist with UBS AG, wrote in a research note.

"The policy easing may lead to a bounce back in business activities in the economy, accompanied with further retreating inflation, which is bullish for the stock market ... but the worsening debt crisis in Europe is adding more pressure to the market in the short term," Wang said.

If the global economy hits a sudden setback, it will result in Chinese GDP falling to 7 percent in 2012, Wang predicted.

Some companies Wen visited are facing difficult business conditions due to weakening demand in developed economies and rising costs at home.

Liu Cunyuan, general manager of Wuhan Haier Electronics, said home appliance sales fell by about 13 percent year-on-year during the first quarter of 2012, as the subsidy program ended.

Xinhua contributed to this story.

 

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