By Paul Panckhurst
April 13 (Bloomberg) -- China’s government is considering additional stimulus measures to boost consumption and bolster growth just as the nation shows more signs of recovering.
The government will issue some “guideline” policies and continue to use fiscal and taxation measures to spur an expansion, the official China Securities Journal reported today, citing Gao Huiqing, a researcher at the State Information Center as saying on April 11. On the same day, Premier Wen Jiabao, said in an interview with state media that China will “closely” monitor changes in the domestic and world economy and “hammer out” new response plans when needed.
China has seen “better-than-expected” changes in the economy after the government rolled out its 4 trillion yuan ($585 billion) stimulus package, Wen said in the interview, citing stronger industrial production, expanding manufacturing index and rallying stock market. Still, Gao, affiliated with the National Development and Reform Commission, said such a recovery, which was spurred by a rebounding market and sales of property and cars, may be short-lived.
“While the stimulus is indeed having an effect on loan growth and some measures of economic activity, the trend decline in exports is unbroken,” said James McCormack, head of Asia sovereign ratings at Fitch Ratings in Hong Kong. “Chinese gross domestic product growth will remain below potential until the global economy recovers.”
China’s 2009 exports may shrink by as much 10 percent and risk the nation’s growth target of 8 percent, Zheng Xinli, the deputy policy research head of the ruling Chinese Communist Party, said at a conference on April 11. Growth probably slowed for the sixth quarter to 6.3 percent in the first quarter compared with a year earlier, according to a median estimate by 12 economists surveyed by Bloomberg News.
New Stimulus
China’s State Council will meet on April 15 to discuss a new stimulus package, the Oriental Morning Post reported on April 11, without citing anyone. The new package will be focused more on social welfare spending and on boosting consumer consumption, the Shanghai-based newspaper said, without elaborating.
China is projecting a record fiscal deficit this year to fund spending on airports, railways, power grids and welfare homes. Policy makers have also lowered interest rates and rolled out industry revival plans to prevent a slump just as the global economy falls deeper into a recession.
To spur domestic consumption to make up loss of overseas sales, China is subsidizing 20 billion yuan this year on rural purchases of televisions and refrigerators and plans to increase spending on welfare by 29 percent.
In the long term, an expanded social safety net may also boost demand. The State Council issued this month an 850 billion yuan health-care plan, including building at least one hospital in every county and expanding medical insurance coverage to 90 percent of the 1.3 billion population by 2011.
To contact the reporters on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net
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