Hold off on large stimulus measures for now, says S&P
By Wang Yanlin |
August 23, 2012, Thursday
|
Print Edition
Print Edition
CHINA can afford another round of stimulus but should not implement it at the moment despite growing economic tensions, a report by Standard & Poor's Ratings Services suggested yesterday.
China has not introduced another large stimulus program this year, but it remains an option if conditions deteriorate sharply, the report said.
"The government retains significant capacity to support economic growth, partly because of China's sizable financial assets," S&P's credit analyst Kim Eng Tan said.
China may be ready to pump money into the economy if the currently stable unemployment rate rises sharply, the report said, adding that the firm expects an economic growth rate of 8 percent this year and 8.2 percent next year.
China's gross domestic product expanded 7.6 percent from a year earlier in the second quarter, a three-year low. Although the central government did not orchestrate stimulus efforts to stabilize the economy, local governments have rushed to unveil new investment plans to shore up confidence.
Tianjin, in north China, on Tuesday set a four-year target of 1.5 trillion yuan (US$236 billion) for industrial investment, following similar moves by Chongqing, in southwest China, Ningbo, in the east, and central China's Changsha.
The central government is cautious about rolling out another round of massive stimulus similar to the 4 trillion yuan program in 2008, which led to persistently high inflation and excessive production capacity.
Zhou Hao, an economist with Australia & New Zealand Banking Group Ltd, said an imminent monetary policy easing and faster implementation of fiscal policy will help China's economy gradually regain momentum. He expects the central bank to cut the reserve requirement ratio this month at the earliest to enrich liquidity in the banking system.
However, some economists disapproved of such moves, instead demanding a more comprehensive plan to counter China's economic slowdown.
"China's economy has contracted not just due to one illness, thus it needs more than one prescription," said Yin Zhongqing, vice chairman of the Economic Committee of the National People's Congress.
China has not introduced another large stimulus program this year, but it remains an option if conditions deteriorate sharply, the report said.
"The government retains significant capacity to support economic growth, partly because of China's sizable financial assets," S&P's credit analyst Kim Eng Tan said.
China may be ready to pump money into the economy if the currently stable unemployment rate rises sharply, the report said, adding that the firm expects an economic growth rate of 8 percent this year and 8.2 percent next year.
China's gross domestic product expanded 7.6 percent from a year earlier in the second quarter, a three-year low. Although the central government did not orchestrate stimulus efforts to stabilize the economy, local governments have rushed to unveil new investment plans to shore up confidence.
Tianjin, in north China, on Tuesday set a four-year target of 1.5 trillion yuan (US$236 billion) for industrial investment, following similar moves by Chongqing, in southwest China, Ningbo, in the east, and central China's Changsha.
The central government is cautious about rolling out another round of massive stimulus similar to the 4 trillion yuan program in 2008, which led to persistently high inflation and excessive production capacity.
Zhou Hao, an economist with Australia & New Zealand Banking Group Ltd, said an imminent monetary policy easing and faster implementation of fiscal policy will help China's economy gradually regain momentum. He expects the central bank to cut the reserve requirement ratio this month at the earliest to enrich liquidity in the banking system.
However, some economists disapproved of such moves, instead demanding a more comprehensive plan to counter China's economic slowdown.
"China's economy has contracted not just due to one illness, thus it needs more than one prescription," said Yin Zhongqing, vice chairman of the Economic Committee of the National People's Congress.
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