China reassures nervous investors
Print Edition
CHINA’S policy-makers yesterday moved to reassure nervous investors at home and abroad with one collective message — the country would put a floor under its slowing economy, keep its currency steady and ensure stable employment despite industrial restructuring.
The assurances come ahead of a meeting of G20 finance chiefs in Shanghai later this month and next month’s annual gathering of China’s legislature — where the next five-year economic development plan will be finalized.
“China’s economic fundamentals have not changed,” said Zhao Chenxin, a spokesman for the National Development and Reform Commission, the country’s top economic planner. “The economy will maintain a medium to high rate of growth,” he told reporters in Beijing.
“China’s status as the world’s largest holder of foreign exchange reserves has not changed, the large-scale trade surplus has not changed and the steady progress in yuan internationalization has not changed.”
However, the country’s gross domestic product expanded 6.9 percent last year, the slowest in a quarter of a century, and economists predict a further cooling this year even if the government expands its yearlong stimulus campaign.
“We think growth could be 6.7 to 6.8 percent this year,” said Xu Gao, chief economist at China Everbright Securities in Beijing.
“The risk of a hard landing is not big. The risk of a hard landing may come from improper government policies. If policies are right, the risk of a hard landing is very small.”
The NDRC plans to allocate 400 billion yuan (US$61.3 billion) to fund local government infrastructure projects, a local branch of the economic planner said in a statement before the Lunar New Year break.
The commission said yesterday that it had approved 54.1 billion yuan of investments in January — following the approval of 2.52 trillion yuan worth of projects last year — to help support growth.
The 21 fixed-asset investment projects where the investment would flow covered water conservancy, transport, technology and energy, Zhao said.
Those projects will help coordinate regional development as well as strengthening water conservancy and transport infrastructure and expanding the electricity network, he said.
Yesterday’s announcement followed measures announced by the central bank on Tuesday to support China’s industries.
Data also showed that banks doled out a record 2.51 trillion yuan in new loans in January, far more than markets had expected and suggesting that China is keeping its monetary policy loose.
Separately, a spokesman for the commerce ministry yesterday downplayed the risk of capital flight and said there was no basis for continued depreciation of the yuan, a scenario that analysts say has been one factor behind the massive sell-off in global markets early this year.
Still, global markets and China’s major trading partners remain nervous about its foreign exchange policy.
The central bank has stunned investors twice in six months — in August and early this year — by allowing sudden, sharp drops in the value of the yuan against the US dollar, only to intervene quickly and forcefully afterward to steady it.
It burned through a record amount of foreign reserves last year as it sold dollars and bought yuan to support the currency and deter speculators betting on further declines.
Zhao also said China had the ability and confidence to maintain stable employment levels, even as the government moves to curb overcapacity in the coal and steel sectors. The government will take steps to resolve overcapacity but will try to reduce the number of layoffs, he said, and the government would distribute funds to help workers reestablish themselves should they lose their jobs.
The unemployment rate in China’s cities was 4.05 percent at the end of 2015, unchanged from three months earlier, according to the latest figures.
China created 13.12 million jobs for urban residents last year, exceeding its target.
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