No big stimulus plan likely, says MOF

By Liang Fei Source:Global Times Published: 2013-7-17 23:03:02

The government will not roll out a massive fiscal stimulus plan this year, according to a posting on the Ministry of Finance's (MOF) website Wednesday, citing Finance Minister Lou Jiwei.

The posting said Lou gave a speech at the fifth meeting of the Economic Track of the US-China Strategic and Econo­mic Dialogue in Washington last week, in which he said the government will conduct policy fine-tuning to boost economic growth and employment, while ­keeping the fiscal deficit stable.

The country's fiscal deficit will remain stable this year, and will account for around 2.2 percent of the country's total GDP, according to Lou. The deficit was 800 billion yuan ($130.4 billion) in 2012, accounting for around 1.5 percent of China's GDP last year.

Economic data released recently has shown a moderate decline in China's economy.

GDP growth slowed to 7.5 percent in the second quarter from 7.7 percent in the first quarter, the National Bureau of Statistics said Monday. GDP growth in the first half was 7.6 percent, compared to a whole-year target of 7.5 percent this year.

Total financial revenue saw 7.5 percent year-on-year growth in the first half according to the MOF, 4.7 percentage points lower than in the same period in 2012. Trade growth and other major economic indexes also saw a modest decline.

"I think the government's fine-tuning policy has already begun," said Lu Ting, China economist with Bank of America Merrill Lynch in Hong Kong, who also noted that a massive stimulus plan is not needed at present as economic growth is still under control.

Lu said that the government should moderately increase central government spending in the second half, to boost development in sectors such as urban infrastructure, telecommunications and sectors related to environmental protection, as this is needed by the Chinese economy at present and it will not cause side effects like overcapacity.

In a meeting held by the State Council Tuesday, Premier Li Keqiang noted that the main target of macroeconomic regulation is to ensure that economic growth remains in a reasonable range and to avoid radical fluctuations.

Li said that the "upper limit" of macroeconomic regulation is to avoid inflation and the "lower limit" is to ensure stable growth and employment.

The central bank has also made clear on several occasions recently that China will maintain a prudent monetary policy in the second half.

Chen Yao, an expert with the ­Chinese Academy of Social Sciences, said that the government has demonstrated strong determination for economic restructuring, but the process could take a long time and the government should be alert to the risk of economic growth ­falling out of a reasonable range.

"I think economic growth is already at a very low level at present and policy fine-tuning is necessary in the second half to guarantee stable growth," Chen told the Global Times Wednesday.

Chen noted that there have been signs that the economic restructuring is making progress, with the services sector and some emerging industries ­growing rapidly at present.

Posted in: Economy

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