By Bloomberg News
June 22 (Bloomberg) -- Chinese Premier Wen Jiabao pledged to keep pumping money into the financial system to sustain growth in the face of recessions around the world.
The government will “fully realize” stimulus measures, Wen said during a June 19-20 trip to Hebei province, according to a statement on the government’s Web site yesterday. It will maintain a “moderately loose” monetary policy and “proactive” fiscal policy, he said.
The world’s third-biggest economy is in a “critical” phase as the government’s 4 trillion yuan ($585 billion) stimulus plan counters a collapse in trade, Wen reiterated. China’s target of 8 percent growth in 2009 contrasts with a World Bank forecast today that the global economy will shrink by 2.9 percent.
The premier “is trying to maintain optimism while acknowledging risks,” David Cohen, head of Asian forecasting at Action Economics in Singapore, said by telephone yesterday. “Global demand will start to pick up and that should provide some boost to Chinese manufacturing.”
The Shanghai Composite Index rose 0.9 percent as of the 11:30 a.m. break in trading, extending this year’s gain to 59.6 percent as investors bet the government can engineer a revival.
A surge in lending, triggered by the central bank scrapping lending quotas and cutting interest rates in the final four months of last year, has continued this month, according to a report in the Shanghai Securities News today.
More Lending
Banks are set to lend more in June than in May, the newspaper said, citing unidentified sources. Last month, new loans more than doubled from a year earlier.
Increased investment in fixed assets has also helped to counter a decline in exports. Spending on factories, property and roads jumped 32.9 percent in the five months through May from a year earlier.
The World Bank raised last week its forecast for China’s growth, citing the effects of government spending. The economy will expand 7.2 percent in 2009 from a year earlier, up from a 6.5 percent forecast in March, the Washington-based lender said.
Drags on growth include rising unemployment, falling company profits and record declines in exports. TCL Corp., China’s biggest maker of consumer electronics, posted a 97 percent plunge in first-quarter profit as exports of televisions and mobile phones fell.
Gross domestic product expanded 6.1 percent in the first quarter, the slowest pace in almost 10 years.
Wen is “very concerned” about the effect of the global financial crisis on China’s steel industry and the damage to the dairy industry from last year’s tainted-milk scandal, according to yesterday’s statement.
At least six children died in China and 300,000 others fell ill last year after drinking milk formula contaminated with the chemical melamine, used in the production of plastics.
Milk production has since recovered only to 80 percent of earlier levels, the statement said.
--Stephanie Wong in Shanghai. Editors: Paul Panckhurst, David Tweed.
To contact Bloomberg News staff for this story: Stephanie Wong in Shanghai at +86-21-6104-7029 or swong139@bloomberg.net
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