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China role in revival is limited, claims Fan

CHINA'S economic recovery would have a positive, but limited, effect on world economic development, leading economist Fan Gang told a forum on the global financial crisis in Beijing yesterday.

China is a developing country and the world economy would pull out of the downturn only after major economies recovered, Fan, secretary general of China Reform Foundation, said on the opening day of the China Development Forum 2009.

With the impact of the global financial crisis on the real economy still deepening, the world economy needed to be prepared for two years of recession, Fan said.

He said China was likely to hit its 8-percent economic growth target this year.

"The increase in new projects and signs of recovery in industrial production show the government stimulus package has begun to have some effect," Fan said.

The central government announced late last year aggressive measures to ease the domestic impact of the global downturn.

These included a 4-trillion-yuan (US$585.7 billion) stimulus package, a plan to expand rural home appliance purchases and support plans for key industries.

Latest statistics showed that in the January-February period, investment in projects authorized by the central government rose 40.3 percent, while spending on projects approved by local governments increased 25.1 percent.

Of the 78,696 projects in progress nationwide, 18,533 are new, up 28 percent from a year earlier. Total planned investment in these projects is 743.7 billion yuan, up 87.5 percent, according to the National Bureau of Statistics.

Industrial output rose 11 percent in February, the first double-digit monthly gain since October.

Zheng Jingping, chief engineer of the statistics bureau, described China's overall economic situation as "fairly good" backed by the measures to stimulate domestic demand.

However, it was still too early to tell whether or not the good signs would continue before March statistics came out, Zhang said.

Meanwhile, China Investment Corp, the country's sovereign wealth fund, was taking a cautious stance toward investments and would not invest in financial derivatives that had no obvious relationship with the real economy, CIC Chairman Lou Jiwei said at the forum.

These derivative financial products should be phased out of the financial market, he said.


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