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China set to rebound as stimulus starts to work

CHINA'S economy, being dragged down by its worst export slump in more than a decade, will rebound this year as the government's 4-trillion-yuan (US$585 billion) stimulus plan takes effect, officials said.

A recovery in the first half is "very likely," central bank Vice Governor Su Ning told reporters as the annual meeting of China's top advisory body started in Beijing yesterday. The government is "confident" of achieving its 8 percent growth target, Minister of Industry and Information Li Yizhong said.

The government may double the spending plan after economic growth cooled to the weakest pace in seven years and 20 million migrant workers lost their jobs, according to Standard Chartered Bank Plc.

Jia Qinglin, a member of the Communist Party of China's Politburo, urged a "vigorous employment policy" in his speech yesterday at the meeting of the Chinese People's Political Consultative Conference.

"There are more signs emerging that we are closer to the bottom," said Kevin Lai, an economist with the Daiwa Institute of Research in Hong Kong. "The worst is probably over."

Lai said positive signs included a surge in new loans to a record in January, falling commodity prices, which would aid Chinese manufacturers, and a restocking of companies' inventories.

The government is studying the possibility of issuing shopping vouchers nationwide to stimulate consumer spending, Commerce Minister Chen Deming told reporters at the meeting yesterday. His ministry is evaluating the effects of similar moves by city and provincial governments, he said.

The economic slowdown has prompted speculation that the government will increase the stimulus package, announced in November last year, which includes spending on houses, roads and power plants and runs through 2010, Bloomberg News said.

Spending likely will rise to 7 trillion to 8 trillion yuan, Sun Mingchun, an economist with Nomura Holdings Inc, said on February 25. Central bank deputy governor Liu Shiyu said that he hasn't heard of a plan for an 8-trillion-yuan package, the China Securities Journal reported on its Website yesterday.

Plummeting trade is adding urgency to the national efforts to revive the economy.

The nation's trade figures in February were worse than in January, when exports fell by the most in almost 13 years and imports plunged by a record, Chen said.

"The effects of the fiscal stimulus will start to be seen in the second half," said Wang Qing, Hong Kong-based chief China economist at Morgan Stanley. "The bulk of the money is yet to be dispersed or even approved."

Wang expects growth to slow to between 3 percent and 4 percent in the first half, picking up in the second, for a full- year expansion of 5.5 percent.


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