Preparing for rapid growth for China

HONG KONG – The Chinese government has further policy tools available to counteract any significant slowdown, while uncertainty surrounding the economy may weigh on credit scores, Fitch Ratings said yesterday.
Premier Wen Jiabao has vowed to focus more on increasing growth after trade and domestic demand were below forecasts last month, data that prompted economists to pare outlooks for the world’s fastest-growing major economy.
Fitch predicts China’s gross domestic product growth will slow to around 8 per cent for this year from 9.2 per cent last year. That compares with the median estimate in a Bloomberg News survey of 8.2 per cent.
“Fitch still believes that the Chinese government still has tremendous scope for policy flexibility, and that this would sort of lean against any risks of a hard landing,” said Mr Art Woo, a Hong Kong-based director in the company’s sovereign group.
“Nevertheless, the degree of uncertainty over the outlook on the Chinese economy is likely to weigh on the ratings in the near term.”
China has a local currency issuer default rating of AA- from Fitch with a negative outlook, while its foreign currency rating is A+ and stable.
The risks to China’s banks and the potential need to bail out lenders in the event of a sharp financial sector downturn could weigh on the country’s public finances “down the road”, according to Mr Woo.
The Chinese government may use stimulus measures ranging from 1 trillion (S$200 million) to 2 trillion yuan, half the size of the package in 2008, to combat an economic slowdown, the Credit Suisse Group said yesterday.
The official Xinhua News Agency said China had no intention to introduce large-scale stimulus like it had done during the financial crisis in response to this year’s slowdown. That package was worth 4 trillion yuan.
“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth. The current efforts for stabilising growth will not repeat the old way of three years ago,” Xinhua said yesterday in a Chinese-language article on economic policy.
Stocks jumped yesterday on speculation the government will take more steps to halt slowing growth. The Shanghai Composite Index rose 1.2 per cent to 2,389.64 at the close, its highest since May 11. BLOOMBERG

“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth. The current efforts for stabilising growth will not repeat the old way of three years ago,” Xinhua said yesterday in a Chinese-language article on economic policy.

(Reuters) – China needs to boost investment to spur economic growth but Beijing should shun aggressive fiscal stimulus, influential academics said in remarks published in leading state-backed newspapers on Wednesday.
They joined a chorus of commentary countering market expectations that China might unveil a stimulus package similar to the 4 trillion yuan in spending unleashed during the global financial crisis.
Earlier this week, an official of the state planner, the National Development and Reform Commission (NDRC), said a large-scale economic stimulus package was unlikely.
An article published on the website of the official Xinhua news agency said China had no plan to repeat the powerful stimulus measures used during the global crisis in 2008.
“The Chinese government’s intention is very obvious: It will not unveil another massive stimulus plan to stimulate economic growth,” the Xinhua article said, without citing sources. “Current policies to stabilize growth will not repeat the old way of stimulating growth three years ago.”
It was not clear if the article, which also cited analysts, represents official thinking – Beijing usually publishes straight-forward commentaries, not analyses, when it wants to explain its stance.
But the story was in line with the mainstream view among Chinese policy advisers that Beijing will shun massive stimulus as it struggles with the after-effects of the package unveiled in late 2008.
Beijing is trying to clean up the roughly 10.7 trillion yuan ($1.7 trillion) in local government debt that resulted from the stimulus package to counter the global financial crisis, which has also been blamed for stoking inflation risks and fuelling a frenzy of property speculation.
The top government researchers and economists warned that excessive investment would reduce the efficiency of economic growth and exacerbate over capacity in some industries.
“It is not necessary for China to launch another massive 4 trillion yuan stimulus plan. We must hold off any impulse of making excessive investment,” said Liu Yuanchun, a professor at the Renmin University, according to the official People’s Daily, the mouthpiece newspaper of the ruling Communist Party.
Chen Bingcai, a professor at the National Academy of Governance, said China must not overly expand investment and sacrifice quality growth for high growth. Chen’s school teaches and trains many senior leaders of the central government.
“If Beijing returns to an investment boom again, the previous call of adjusting the economic structure would turn out to be nothing but empty talk,” the official China Securities Journal cited Chen as saying.
China’s economy is on course this year to grow 8.2 percent, its slowest pace since 1999, according to the consensus forecast of investment bank economists in the latest benchmark Reuters poll.
Beijing has unveiled several measures to boost domestic consumption and private investment as the economy faces the headwinds of a slowdown in export demand growth.
Such moves include fast-tracking approval of infrastructure investment, offering subsidies for buying energy-saving home appliances, encouraging more private capital to enter a handful of sectors, which are dominated by state firms.
The NDRC, China’s top economic planning agency, gave the green light to around 100 projects on May 21, fanning speculation that Beijing may initiate a new fiscal spending spree.
Global financial markets have been caught in a frenzy of speculation on the subject, which lingered on Wednesday.
Local media reports in China on Tuesday cited unconfirmed talk that Beijing was readying fresh stimulus. The tone had reversed by the end of the trading day in China.
Media began citing a microblog reference to a news briefing, purported to have been held by the NDRC, denying that a stimulus package like the one in the global financial crisis was in the pipeline.
The original Twitter-like microblog entry, reported by local media to have been on the official Xinhua microblog, could not be found when checked by Reuters. There was no mention of it on the Xinhua newswire or its public website.
The NDRC website carried no reference to the report, or a news conference and declined to comment when contacted by Reuters.
The later Chinese media reports cited the NRDC as saying there had been a misinterpretation of the May 21 announcements and that the project approvals had nothing to do with efforts to stabilize economic growth.
Luo Guosan, deputy director of the investment office at the NDRC, had said earlier in the week that there was little chance of Beijing unveiling another big spending plan to pump-prime the economy.
“We want to target and maintain a reasonable level of investment in society to stabilize economic growth. To think about having another large-scale government-led investment spurt to stimulate economic growth, that is unlikely because it is not sustainable,” Luo was quoted as saying in the Chongqing Commercial Daily on Monday.
The stimulus package during the global downturn fuelled speculation in China’s real estate sector and left local government with a mountain of debt.
“We should pay attention to the investment growth pace, as the previous 4 trillion yuan stimulus plan has left us with many uncompleted projects. If we start new projects again, we may finally fail to wean the economy from investment,” Bai Chongen, a professor at the Tsinghua University, was quoted as saying by the People’s Daily.
($1 = 6.3480 yuan)
(Reporting by Aileen Wang and Nick Edwards; Editing by Don Durfee and Neil Fullick)

The world economy is best served by Asia, with China leading the way to counter slowing demand by US and the EU, so China has an option to kick start it’s economy thru innovations and technology into various sectors, investing for the future, to ensure rapid economic growth. Reforms in healthcare and aviation, including the banking industry could require as much as 2 trillion yuan but the returns are justified as it will help maintain sustainable growth with rapid expansion of it’s domestic labour force. Please check my blogs on those technologies that will create an air hub for all cities in china, where travel and tourism will help boost domestic consumption. The next sector is healthcare, where the training and education of doctors is crucial for them to get overseas exposure for the latest advancement in healthcare technologies, thru co-operation to bring back expertise to boost it’s own industry. The next target is the banking industry, where a carefully orchestrated privatisation for FDI and the liberisation of it’s stock markets will bring billions of addition funds to fuel it’s GDP growth. If all 3 sectors are carefully orchestrated with reforms, we could see China having GDP growth above 15% again, the driving force of the global economy. If nothing is done, the projections of growth for GDP for china could drop to the bottom of 6%, a slowdown for the rest of Asia
– Contributed by Oogle.

Author: Gilbert Tan TS

IT expert with more than 20 years experience in Multiple OS, Security, Data & Internet , Interests include AI and Big Data, Internet and multimedia. An experienced Real Estate agent, Insurance agent, and a Futures trader. I am capable of finding any answers in the world you want as long as there are reports available online for me to do my own research to bring you closest to all the unsolved mysteries in this world, because I can find all the paths to the Truth, and what the Future holds. All I need is to observe, test and probe to research on anything I want, what you need to do will take months to achieve, all I need is a few hours.​

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