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World assured of stimulus efforts

By Fu Jing and Si Tingting in Beijing and Bi Xiaoning in Dalian (China Daily/Agencies)
Updated: 2009-09-11 07:43

Premier Wen Jiabao and World Economic Forum founder Klaus Schwab kick off the opening ceremony of the 2009 Summer Davos in Dalian, Liaoning province, yesterday. [China Daily]

China will not end its stimulus initiatives at a time when the global economy is starting to see "slow and zigzag" recovery from its free fall, Premier Wen Jiabao assured global business leaders yesterday.

Instead, he said the country will "enrich its stimulus package" to better link it to the creation of new engines of China's growth.

"We cannot and will not change the direction of our policies at an inappropriate time," Wen said at the opening of the World Economic Forum in Dalian, Liaoning province.

"The foundations of China's economic recovery are not stable, not solidified and unbalanced and the global economic outlook is uncertain," he said.

"The top priority of our work is to maintain stable and quick economic growth, so we will unswervingly stick to a relatively loose monetary policy and an active fiscal policy," said Wen.

Economists and analysts saw Wen's rejection of an early "stimulus exit" as a firm international commitment to shore up the global economy and they said the subject is sure to be further debated at the upcoming G20 leaders summit in Pittsburgh, Pa., late this month.

Foreign Ministry spokesperson Jiang Yu said yesterday in Beijing that China hopes the forum will help tackle the world economic downturn and send a "stronger signal" for global recovery.

"It's too early to discuss the stimulus exit timetable because the global economy is still filled with uncertainties," Bi Jiyao, a senior economist with the National Development and Reform Commission, told China Daily.

Bi said developed economies may consider withdrawing their fiscal stimulus measures around the middle of next year, if the world economy steadily picks up.

"For China, I think we will continue with strong fiscal spending but we should readjust where the taxpayers' money is going," said Bi.

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Wen said China would insist on policy consistency to ensure high-speed economic growth.

"We should fully implement and continuously improve policies and discover and resolve new problems in a timely manner," said Wen. He warned about the risk of inflation even though the country was still experiencing deflation.

"We should be alert and prevent all potential risks, including inflation," he said.

China Daily learned yesterday from reliable sources that industrial growth last month was believed to be up by between 8.0 and 8.5 percent from 7.5 percent in July.

The financial crisis led to the figure plunging to 3.8 percent in February, compared to its average of 15 percent before the financial turmoil.

China began the year with many economists predicting that it would fail to hit its target of 8 percent growth for the year, which is crucial if China is to generate enough jobs for its millions of migrant workers.

Hitting 8 percent is now within reach after China's economy expanded 7.9 percent in the second quarter, according to the central bank.

Analysts have applauded the effectiveness of China's two-year, 4-trillion-yuan ($585 billion) stimulus package, but some have fretted that, in emphasizing investment, China has slowed the much-needed transition to a consumption-driven economy.

Rising incomes, along with rapid urbanization, have underpinned consumption, but China's flimsy welfare safety net has meant households are still typically saving about 30 percent of their incomes.

Wen made no bones about China's challenges, saying its stimulus policies needed to be as focused on restructuring the economy as on kick-starting growth.

"We will enrich our stimulus package focus on restructuring the economy, and make greater efforts to enhance the role of domestic demand, especially final consumption in spurring growth," Wen said.

Yin Xingmin, director of the China Center for Economic Studies at Fudan University, said China needs to channel more assistance and financial resources toward small- and medium-sized enterprises (SMEs) when considering "enriching" its stimulus packages.

"I think more SMEs should be included in the future stimulus efforts because most of the beneficiaries of the first round of the government-led stimulus package were State-owned and monopoly enterprises," said Yin.

He predicted the country would shift its primary focus from infrastructure construction to improving people's lives, although investment on infrastructure would still be significant.

Zhang Yuanda, deputy secretary-general of the China Association of Small and Medium Enterprises, said the government should redesign its policies and measures to let SMEs benefit from upstream or downstream spin-offs from large infrastructure projects, such as the construction of railways and highways.

"They may become service suppliers, material suppliers or subcontractors," Zhang explained. He also said companies involved in hi-tech industries and innovation were likely to become the biggest beneficiaries of future stimulus efforts.

In the long run, Wen said, the country must increase the share of consumption in domestic demand, raise urban and rural incomes, improve consumer expectations and enhance people's willingness and capacity to spend.