Stimulus policy set to continue
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It is too early for the government to withdraw its economic stimulus policy, a senior financial official has said while calling on other countries to coordinate their exit strategy to strengthen the fledgling recovery.
Zhu Guangyao, assistant minister of finance, also told China Daily that the government is not ready to exit from its proactive fiscal policy, which spared the country the worst of the global economic slump.
The global economic situation is too unpredictable at present to make such a move, Zhu said, echoing Premier Wen Jiabao's remarks at the opening session of the National People's Congress (NPC) on Friday.
"This year, we will continue to implement the economic stimulus package," he said.
The government announced a US$586-billion stimulus package in late 2008, which was designed to roll out in 2009 and this year.
"The central government has taken into consideration the effect of the global financial crisis that will continue to be felt this year," Zhu said.
With China's GDP growth reaching 8.7 percent year-on-year and new yuan loans amounting to 9.6 trillion yuan (US$1.4 trillion) in 2009, investors are concerned the government may halt stimulus measures to avoid rising inflation and asset bubbles - especially in the wake of the two reserve requirement hikes this year.
But Zhu said the stimulus policy will continue, and China will stick to a proactive fiscal policy and moderately easy monetary stance.
"We must not interpret the economic turnaround as a fundamental improvement in the economic situation," Wen said Friday.
Li Yining, senior economist and member of the Chinese People's Political Consultative Conference (CPPCC) National Committee, warned that it would do the Chinese economy more harm than good if the country exited the stimulus package now.
Recovery in developed countries is not entrenched; and domestically, although new orders are increasing, "more time is needed to monitor their sustainability".
"We need to wait until at least the third quarter of this year to see whether the time is ripe for an exit," he said on the sidelines of the NPC and CPPCC sessions.
The government will focus more on restructuring the economy while continuing the stimulus measures, Zhu said.
More domestically-driven growth, fueled by consumers increasingly confident about their incomes and welfare protection, is needed to keep the world's third-biggest economy growing at a solid pace, he said.
As part of the economic realignment, the government has poured 100 billion yuan into energy saving and emission cuts annually in the past three years.
Zhu said the input is set to increase this year and more resources will be directed to agriculture, education, health, and housing for low-income earners.
Wen announced an increase of 8.8 percent on social spending and 12.8 percent on rural outlays to narrow the yawning wealth gap.
Zhu also called on the international community to coordinate their pace in any exit strategy.
"The current growth in the world economy is not stable and a premature exit could lead to a new round of economic crisis."
Zhu also criticized the US for its trade protectionism. Washington has imposed a series of trade measures - and threatened more - to block Chinese products exported to the US market. It is also pressuring Beijing to let the renminbi appreciate, which would make Chinese exports to the US more expensive.
Zhu said the US is taking such steps because of domestic problems, such as a high unemployment rate and the upcoming mid-term elections.
"We think the US has retrogressed in terms of fighting protectionism," Zhu said. "This is a core factor behind the trade frictions between the two countries."
