China dismisses speculation over mega stimulus package to spur economy

 China will not resort to heavy stimulus package to halt slowdown of its economy, a planning body official said today, dismissing concerns over reports of $6.54 billion fixed-asset investments plans for this year.

“Instead, China will focus on supply-side reform for a modest expansion of aggregate demand,” Li Pumin, secretary general of the National Development and Reform Commission, told media here answering a question on whether China would roll out a major stimulus plan like in 2008.

“Stimulus plans are used to prop up weak demand with government investment under special circumstances,” he said but at the same time defended heavy fixed-asset investments (FAI) saying that they are different.

It was reported that 23 provincial-level regions had announced FAI volume totalling some 45 trillion yuan (about $6.54 trillion) for 2017, stoking concern of a gigantic stimulus plan, state-run Xinhua news agency reported.

Li dismissed the worries, saying FAI volume is the aggregate rather than newly-added investment and includes investment from the public and private sector.

The FAI volume of 32 provincial-level regions rose 7.9 per cent year-on-year to 60.65 trillion yuan in 2016 and is likely to hit 65 trillion yuan, Li said.

After China’s economy entered a “new normal” stage, the major difficulties were a by-product of supply rather than demand, he said.

The addition of excessive production capacity and redundant projects will be forestalled, and more efforts will be made to meet demand with effective supply, he added.

Also China has allotted $116.8 billion in addition to the same amount as last year to expand the well developed railway network as government continue to rely on investment driven economy to spur growth as the economy continued to slowdown.

China’s economy slowed down to 6.7 per cent from 6.9 per cent in 2015, a 25-year low. The slowdown was expected to continue.

China is trying to transition its export- and investment-driven growth model into one that draws strength from consumption, innovation and the service sector.

Consumption contributed 64.6 per cent to China’s GDP growth in 2016, up 4.9 percentage points from 2015, official data showed.

Meanwhile, China has decided to adopt a “prudent and neutral” monetary policy this year to keep liquidity at an appropriate level and avoid large injections.

Official data released today showed that China’s manufacturing purchasing managers’ index expanded for the seventh month in a row to hit 51.6 per cent in February, further evidence that the world’s second largest economy is stabilising amid the uncertain global outlook.

–Economic Times

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