China Promises to Make Growth a Bigger Priority

by


Chinese Premier Wen Jiabao has called for stimulus policies that would boost the nation’s slowing economic prospects, raising expectations that the government will undertake new expansionary measures to prevent a hard landing for the world’s second largest economy.

Speaking to reporters during a visit to the city of Wuhan, Premier Wen gave no details of the possible new measures, but added that it was necessary to keep inflation in check, while keeping growth a top priority.

First quarter economic data for China has been largely disappointing, with exports slowing and consumer spending and home sales unexpectedly weak.

Calling for greater efforts to support growth, through more monetary fine-tuning and fiscal incentives, Wen was quoted by the Xinhua news agency as saying:


The relationship between maintaining growth, adjusting economic structures and managing inflation must be properly handled. We should continue to implement a proactive fiscal policy and a prudent monetary approach while giving more priority to maintaining growth.

Following April’s disappointing economic results, Beijing has been quick to introduce a series of stimulus measures, including lowering the bank reserve requirement – three cuts in the past six months, to be exact.

Related News: China FDI Falls For the Sixth Consecutive Month

Related News: China Lowers Bank Requirement, Over $60b Expected to Enter Financial System

Analysts had been predicting the Chinese economy would bottom out in the second quarter of 2012, before rebounding in the last six months, but the April data indicated that the slowdown may be more intense and lasting.

The government has set a growth target of 7.5 percent for 2012, fearing anything below that level could trigger mass unemployment and cause widespread unrest in the world's second-largest economy.

Speaking to Businessweek, Alaistair Chan, an economist with Moody’s said:


The April data has been a wake-up call for China. There will probably be some stimulus measures through monetary policy and more bank lending and infrastructure projects being brought forward.

Related Story: 12 Predictions for the Chinese Economy: Michael Pettis

Related Story: How China Can Rebalance Its Economy: Michael Pettis

Related Story: China’s Economic Puzzle: Why The Bears & Bulls Just Can’t Agree