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Friday, 21 March 2014 04:05 - - {{hitsCtrl.values.hits}}
No further details were given in an official statement following the meeting, and it was not clear if Li had given authorities a green light to accelerate new investment, or to start work on projects that have already been approved.
But his remarks, which came after China quietly revealed last week that it had signed off on 142 billion yuan worth of railway projects this year, stoked talk among analysts that Beijing is ready to stimulate the economy.
China rattled financial markets earlier this month with data showing growth in investment, retail sales and factory output plumbing multi-year lows in January and February.
Investors, multinational companies and its major trading partners fear a sharper-than-expected slowdown in China will soon drag on activity across the world.
Ramping up state investment to shore up the economy has been par for the course in China in recent years.
In 2008/09, in the face of the global financial crisis, Beijing approved a whopping 4 trillion yuan of state spending funded partly by bank loans.
That spending helped China recover quickly from the crisis, but the mountain of debt incurred fed other credit problems that the government now hopes to fix, in part by abandoning its former export- and investment-driven growth model.
Stimulus measures announced in several economic soft patches since then have been more modest and more focused, such as last year’s spending on social housing, infrastructure and energy-saving industries, and tax breaks for smaller firms.
The five railway projects tipped last week were approved in January and February and will get half of their funding from bank loans, according to the country’s economic planner, the National Development and Reform Commission.
Some analysts cautioned investors against taking the latest projects as an indication that China is ramping up spending again, as the construction sector usually picks up in March as the weather turns warm.
They said if China does increase investment in coming months, it would be a setback for broader economic reforms, but arguably an unavoidable one as Beijing is intent on growing the economy by around 7.5 percent this year to boost incomes and employment.
“Of course it will compromise reforms, but the starting point is that the government has to seek a compromise between growth and reforms,” said Tao Wang, an economist at UBS. “It was always meant to be a balance.”
At a plenum meeting of the Communist Party last November, China announced ambitious reforms that signalled the shift of the world’s second-biggest economy from investment- and export-fuelled growth towards a slower, more balanced and sustained expansion.
Some changes, such as government downsizing or closures of debt-laden factories, are likely to take a back seat to avoid fuelling job losses and undermining social stability, analysts have said.
China has been showing some determination to reform and few experts believe Beijing will launch another super-sized stimulus to prop up the economy.
On Thursday, the government relaxed rules to allow more foreigners to invest in its stock markets, the latest step to free its financial markets after widening the yuan’s trading band at the weekend, taking it closer to turning the yuan into a convertible, global currency.
China also has lifted a ban on equity financing for listed property developers for the first time in four years, a step that could herald less government intervention in the sector and ease funding concerns as credit grows tight and the economy slows.
