China’s Wen urges more support for growth

Tuesday, 22 May 2012 00:21 - - {{hitsCtrl.values.hits}}

Reuters: China’s premier called for additional efforts to support growth on Sunday, signalling Beijing’s willingness to take action after a recent series of economic indicators suggested that the world’s second-biggest economy will slow further in the second quarter.

“We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth,” Premier Wen Jiabao said in comments reported by state news agency Xinhua.

Chinese exports rose by 4.9 percent in April, barely half the rate which economists had forecast, while imports fell far short of expectations. In addition foreign direct investment slid lower in the first four months of 2012.

The numbers, released last week, pointed to slower growth for China in the face of external headwinds that pushed economic growth in the first quarter down to 8.1 percent, the slowest pace in almost three years.

The latest Reuters poll showed that private sector economists expect China’s growth to ease to 7.9 percent in Q2 from an 8.1 percent annual rate in Q1. They forecast full-year growth of 8.2 percent.

Wen said the central government will continue to strengthen and improve macro control efforts, carry out fine-tuning, boost domestic consumption and stabilise external demand, said the Xinhua report.

Earlier this month China’s central bank cut the amount of cash that banks must hold as reserves, freeing an estimated 400 billion yuan for lending to add to the roughly 800 billion injected in two previous 0.5 percentage-point cuts in required reserves since the government tilted its policy stance towards growth in October.

But few analysts expect Beijing to unveil stimulus measures that come anywhere near the mammoth 4 trillion yuan spending plan launched during the 2008-2009 financial crisis.

So far China has taken some more modest steps, including earmarking 26.5 billion yuan in subsidies last week for energy-saving home appliances as part of steps to boost domestic consumption. The government will also dole out 6 billion yuan to promote the use of cars with engines smaller than 1.6 litres.

Wen didn’t specify what steps the government might take to stabilise external demand.

Investors worry that continued turmoil in the eurozone will further dent Chinese exports.

Not all analysts see cause for alarm. Last week, a senior statistics official said leading indicators, including new orders and input purchasing sub-indexes in the official purchasing manager index, are already showing signs of an uptick in the economy.