Published March 6, 2009

China to stare down crisis and grow 8%

Wen's promise cheers markets as China plans to create 9m new jobs

By ANTHONY ROWLEY

	Email this article
	Print article
	Feedback

CHINESE Premier Wen Jiabao lit a beacon of hope around the world yesterday by promising that China would do all it takes to achieve its growth target of 8 per cent this year with a programme of massive government spending and employment creation. The news helped to lift some of the gloom that has descended on stock markets amidst global economic recession.

China will give full play to the leading role of domestic demand, especially consumer demand, in driving economic growth, Mr Wen told 3,000 delegates at the 11th National People's Congress (NPC), which opened in Beijing yesterday.

He outlined what China's Xinhua news agency described as a 'massive package', of measures, which included major government investments, tax reform, industrial restructuring, scientific innovation, social welfare and employment promotion.

The premier did not put a figure on the proposed total spending but analysts say this is likely to emerge later as the Chinese central government and provincial governments coordinate their spending plans.

Analysts said that, with its nearly US$2 trillion of foreign exchange reserves, China is best placed among the world's major economies to carry out stimulus on a massive scale.

Beijing has so far announced some 4 trillion yuan (S$908 billion) of stimulus spending but sources have suggested to BT recently that spending by local governments could total many times that amount.

The promise of major new stimulus measures in China, leading to export orders for plant and equipment, provided some much needed cheer in the Tokyo stock market yesterday after news that Japanese corporate capital spending had collapsed in Q4 2008.

The Nikkei 225 index rose 2 per cent to 7,433.49. The Shanghai Composite Index meanwhile rose one per cent to 2,221.08 and other stock markets also reacted positively to the Chinese stimulus plans.

As demand on international markets continues to shrink, the Chinese government will adopt 'a proactive fiscal policy' and significantly increase government spending to expand domestic demand, Xinhua quoted Mr Wen as telling the NPC.

For China, 'a developing country with a population of 1.3 billion, maintaining a certain growth rate for the economy is essential for expanding employment for both urban and rural residents, increasing people's incomes and ensuring social stability', Mr Wen said

'As long as we adopt the right policies and appropriate measures and implement them efficiently, we will be able to achieve this target,' he declared.

Other key economic and social targets he mentioned included creating more than nine million jobs in Chinese cities, controlling the urban registered unemployment rate at under 4.6 per cent and keeping the rise of the Consumer Price Index to around 4 per cent.

Listing key government tasks, Mr Wen said that the focus this year is to sustain economic growth, improve people's well-being and maintain stability. Dealing with the global financial crisis and promoting steady and rapid economic development is 'a high priority of the government', he said.

Mr Wen announced that a total of 908 billion yuan of the central government investment this year will go to projects aimed at improving people's lives. These include low-income housing, education, heathcare and culture, energy conservation, environmental protection, technology innovation, key infrastructure construction and post-earthquake reconstruction.

'We must channel government investment to areas where it best counteracts the effects of the global financial crisis and to weak areas in economic and social development, and no government investment will be made in the regular processing industries,' Mr Wen said.

As part of the efforts to shore up domestic demand, China will also increase investment to improve the country's social security network, whose low coverage has long been blamed for China's high savings rate. 'This year we will concentrate on accomplishing major tasks that are urgently needed in economic and social development and directly related to the vital interests of the people to improve well-being,' Mr Wen added