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Saturday 28 November 2009
China won’t pull plug on stimulus next year
China’s Politburo, the Communist Party’s top decision-making body, said the nation will maintain stimulus policies next year as the world’s third-biggest economy recovers from the global slump.
Top decision-making body pledges to stay the course with moderately loose monetary stance
28 November 2009
China’s Politburo, the Communist Party’s top decision-making body, said the nation will maintain stimulus policies next year as the world’s third-biggest economy recovers from the global slump.
The government will continue a proactive fiscal policy and a ‘moderately loose’ monetary stance, the state-run Xinhua News Agency reported yesterday after a meeting chaired by President Hu Jintao.
The party’s decision-making Politburo pledged to make growth more stable, more sustainable and more balanced, Xinhua reported.
To that end, China would promote sustainable domestic demand, especially consumption and private investment, increase imports and encourage companies to invest abroad, according to the website of CCTV, the main state television channel.
‘Our primary task in economic work must be maintaining stable, relatively fast development, adhering to an active fiscal policy and appropriately relaxed monetary policy,’ CCTV said in a summary of the meeting.
Qing Wang, an economist with Morgan Stanley, said the announcement was consistent with his view that China will return to a more moderate pace of lending growth in 2010. But it is unlikely to raise interest rates or banks’ required reserve ratios before the middle of the year.
‘The super-loose policy stance is to normalise but remain generally supportive in 2010,’ he said in a note.
The summaries of the meeting made no reference to managing inflationary expectations, which the State Council, or the Cabinet, said last month had become a priority. That omission struck some as a sign that Beijing was even more committed to maintaining its stimulus policies.
‘This indicates that the government is confident that the overall price level will be controllable next year, and that inflation is a relatively distant risk for the economy,’ said Qi Jingmei, an economist with the State Information Centre, a government think-tank.
Also notable by its absence was any mention of the yuan, China’s currency. The United States, the European Union and the International Monetary Fund have all recently identified the currency as being undervalued and, as such, a contributing cause of the economic imbalances at the heart of the crisis.
China’s sole comment about the yuan yesterday came from Chen Deming, the commerce minister, at a press conference in Paris. A stable yuan was conducive not just to China’s economic recovery but also to the global recovery, he said.
The 25-member Politburo, chaired by President Hu, the head of the Communist Party, judged that the conditions for growth were favourable in many respects but said China still faced ‘many difficulties and contradictions’.
Faced with changing conditions, China needed to improve the focus and flexibility of its policies, the Politburo concluded.
‘In particular, we must pay greater attention to improve the quality of and returns from economic growth,’ CCTV reported.
Premier Wen Jiabao has consistently lamented the lop-sided, unsustainable nature of growth, which is driven by investment, heavy industry and exports.
China is striving to pass the baton of growth to domestically oriented sectors of the economy, including services, which consume fewer resources and do less damage to the environment.
The meeting came a day after China announced it was aiming to reduce the amount of carbon dioxide produced for each yuan of national income by 40 per cent to 45 per cent by 2020 compared with 2005 levels. In keeping with that goal, China would step up construction of big projects related to energy conservation and environmental protection as part of a drive to deal ‘actively’ with climate change, Xinhua said. -- Reuters, Bloomberg
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China won’t pull plug on stimulus next year
Top decision-making body pledges to stay the course with moderately loose monetary stance
28 November 2009
China’s Politburo, the Communist Party’s top decision-making body, said the nation will maintain stimulus policies next year as the world’s third-biggest economy recovers from the global slump.
The government will continue a proactive fiscal policy and a ‘moderately loose’ monetary stance, the state-run Xinhua News Agency reported yesterday after a meeting chaired by President Hu Jintao.
The party’s decision-making Politburo pledged to make growth more stable, more sustainable and more balanced, Xinhua reported.
To that end, China would promote sustainable domestic demand, especially consumption and private investment, increase imports and encourage companies to invest abroad, according to the website of CCTV, the main state television channel.
‘Our primary task in economic work must be maintaining stable, relatively fast development, adhering to an active fiscal policy and appropriately relaxed monetary policy,’ CCTV said in a summary of the meeting.
Qing Wang, an economist with Morgan Stanley, said the announcement was consistent with his view that China will return to a more moderate pace of lending growth in 2010. But it is unlikely to raise interest rates or banks’ required reserve ratios before the middle of the year.
‘The super-loose policy stance is to normalise but remain generally supportive in 2010,’ he said in a note.
The summaries of the meeting made no reference to managing inflationary expectations, which the State Council, or the Cabinet, said last month had become a priority. That omission struck some as a sign that Beijing was even more committed to maintaining its stimulus policies.
‘This indicates that the government is confident that the overall price level will be controllable next year, and that inflation is a relatively distant risk for the economy,’ said Qi Jingmei, an economist with the State Information Centre, a government think-tank.
Also notable by its absence was any mention of the yuan, China’s currency. The United States, the European Union and the International Monetary Fund have all recently identified the currency as being undervalued and, as such, a contributing cause of the economic imbalances at the heart of the crisis.
China’s sole comment about the yuan yesterday came from Chen Deming, the commerce minister, at a press conference in Paris. A stable yuan was conducive not just to China’s economic recovery but also to the global recovery, he said.
The 25-member Politburo, chaired by President Hu, the head of the Communist Party, judged that the conditions for growth were favourable in many respects but said China still faced ‘many difficulties and contradictions’.
Faced with changing conditions, China needed to improve the focus and flexibility of its policies, the Politburo concluded.
‘In particular, we must pay greater attention to improve the quality of and returns from economic growth,’ CCTV reported.
Premier Wen Jiabao has consistently lamented the lop-sided, unsustainable nature of growth, which is driven by investment, heavy industry and exports.
China is striving to pass the baton of growth to domestically oriented sectors of the economy, including services, which consume fewer resources and do less damage to the environment.
The meeting came a day after China announced it was aiming to reduce the amount of carbon dioxide produced for each yuan of national income by 40 per cent to 45 per cent by 2020 compared with 2005 levels. In keeping with that goal, China would step up construction of big projects related to energy conservation and environmental protection as part of a drive to deal ‘actively’ with climate change, Xinhua said. -- Reuters, Bloomberg
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