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Analysts urge China to speed up fiscal program execution
By Wang Yanlin |
May 30, 2012, Wednesday
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Online Edition
Online Edition
IT is necessary for China to speed up implementation of fiscal commitments, but it should be carried out in a way that promotes longer-term growth with fewer bubbles and less inequality, analysts said.
"The worsening external environment and slowing domestic activities have served as a wake-up call for the Chinese authorities," said Liu Ligang, an economist at Australia and New Zealand Banking Group Ltd. "The latest policy announcements suggest that the faster implementation of the current fiscal program is at the top of the nation's agenda."
However, Liu did not expect anything similar to the program announced in late 2008 and said the policy support for growth, though urgent, should remain modest.
"Governments at all levels must honor their budgetary commitments to the nation's ambitious public housing program, and see faster approval of already planned infrastructure programs rather than announce a new and large fiscal stimulus," Liu said today. "This, together with further monetary policy easing, will help resurrect the economy's flagging growth."
Since last week, China's State Council has announced a set of stimulus measures to support both domestic demand and investment. The Cabinet resumed subsidies for the purchase of energy-saving home appliances, and allowed private investment in state-dominated fields like railways, energy, telecommunications, education and health care.
Meanwhile, the National Development and Reform Commission has accelerated approvals of new investment projects since March, alongside the People's Bank of China's "window guidance" and the reserve requirement ratio cuts.
The moves, regarded as strong signs of government attention to "stabilize growth," prompted market speculation of a new round of stimulus.
Tao Dong, an economist with Credit Suisse, said on Monday that China may pump in as much as 2 trillion yuan (US$315 billion) in investment to boost the economy, half as much as in 2008.
However, Xinhua news agency said in a report today that Beijing is unlikely to roll out any stimulus packages that are as aggressive as in 2008, and reinforced the necessity of avoiding rash investment.
The 4 trillion yuan stimulus package launched in 2008 resulted in a slew of problems including high inflation, overcapacity, local government debt crisis and bad loans.
Huang Yiping, an economist at Barclays Capital, said although the policy actions may look like the ones adopted nearly four years ago, they are in nature not a big stimulus package.
"The projects are launched under the Five-Year Plan (2011-2015) program, spending is more modest, and the projects and industries are chosen more selectively," Huang said.
"The worsening external environment and slowing domestic activities have served as a wake-up call for the Chinese authorities," said Liu Ligang, an economist at Australia and New Zealand Banking Group Ltd. "The latest policy announcements suggest that the faster implementation of the current fiscal program is at the top of the nation's agenda."
However, Liu did not expect anything similar to the program announced in late 2008 and said the policy support for growth, though urgent, should remain modest.
"Governments at all levels must honor their budgetary commitments to the nation's ambitious public housing program, and see faster approval of already planned infrastructure programs rather than announce a new and large fiscal stimulus," Liu said today. "This, together with further monetary policy easing, will help resurrect the economy's flagging growth."
Since last week, China's State Council has announced a set of stimulus measures to support both domestic demand and investment. The Cabinet resumed subsidies for the purchase of energy-saving home appliances, and allowed private investment in state-dominated fields like railways, energy, telecommunications, education and health care.
Meanwhile, the National Development and Reform Commission has accelerated approvals of new investment projects since March, alongside the People's Bank of China's "window guidance" and the reserve requirement ratio cuts.
The moves, regarded as strong signs of government attention to "stabilize growth," prompted market speculation of a new round of stimulus.
Tao Dong, an economist with Credit Suisse, said on Monday that China may pump in as much as 2 trillion yuan (US$315 billion) in investment to boost the economy, half as much as in 2008.
However, Xinhua news agency said in a report today that Beijing is unlikely to roll out any stimulus packages that are as aggressive as in 2008, and reinforced the necessity of avoiding rash investment.
The 4 trillion yuan stimulus package launched in 2008 resulted in a slew of problems including high inflation, overcapacity, local government debt crisis and bad loans.
Huang Yiping, an economist at Barclays Capital, said although the policy actions may look like the ones adopted nearly four years ago, they are in nature not a big stimulus package.
"The projects are launched under the Five-Year Plan (2011-2015) program, spending is more modest, and the projects and industries are chosen more selectively," Huang said.
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