China's Cabinet on Wednesday sought toshore up economic weakness in the country, pledging more attentionto "stabilizing economic growth" amid fears that the world'ssecond-largest economy may slow further in coming months. Authorities should give more priority to stabilizing growth andactively boost domestic demand as the economy faces "increasingdownward pressure," the State Council said Wednesday. The government should "place stabilizing growth in a more importantposition and carry out preemptive policy adjustments andfine-tuning more forcefully according to the changing situation,"according to a statement issued after an executive meeting of theState Council presided over by Premier Wen Jiabao. "Some prominent contradictions and problems still exist in thecountry's economic development. In particular, the pressure for adownward economic movement is increasing," the statement said. |
It noted that China's economy is generally stable with an economicgrowth rate being kept within the expected target set at thebeginning of the year. However, the environment at home and abroad is becoming morecomplicated, making the world economic recovery more uneven andmore difficult, the statement warned. The Chinese government set the full-year gross domestic product(GDP) growth target at 7.5 percent for 2012, scaling back the GDPgrowth goal below 8 percent for the first time in eight years. In the first quarter of 2012, China's GDP growth slowed to 8.1percent from 8.4 percent in the fourth quarter of last year,raising concerns that the world's second-largest economy maydecelerate further in coming months amid weak external demand andrenewed worries over sovereign debt default in Europe. The statement repeated the government's stance to properly maintaina balance between ensuring steady and robust economic development,adjusting the economic structure and managing expectations oninflation.
"The general direction of the macroeconomic control is unchanged,"said Zhang Liqun, a research fellow with the State CouncilDevelopment Research Center. "But the sharp slowdown in the economyhas aroused attention from policymakers." Responding to the latest changes in the economy, the statementemphasized that efforts be taken to make policies more targeted,more flexible and more foresighted and expand domestic demand. The Cabinet urged the implementation of structural tax reductionmeasures to relax the tax burden for business while maintaining aprudent monetary policy. The statement called for optimizing the credit structure to focusmore on satisfying the needs of the real economy and keep socialfinancing at a reasonable level.
The Cabinet also pressed for early construction of major projectsin the fields of railways, energy-saving and environmentalprotection, as well as infrastructure, educational and health carefacilities in rural and western areas. It is hoped that private capital can be lured into sectors such asthe construction of railways, municipal utilities, energy,telecommunications, education and health care, according to thestatement. The tightening of the housing market, which makes up a large partof China's economy, will be stabilized and strictly implemented,the statement said, dampening speculation that the government mightloosen its macro control of the sector any time soon. Analysts expect China's economic growth to slow further, judgingfrom April's leading indicators on exports, fixed-asset investmentand domestic consumption, which are considered as three majorengines powering the economy.
"In the past two weeks, new problems have emerged in the UnitedStates and Europe, which is set to downsize China's exports andbring down people's expectation toward the economy," said Li Jian,a researcher with the Ministry of Commerce. To spur economic growth, the key lies in monetary policy, addedZhang Liqun, who saw a laggard effect of the monetary tightening onthe economy. To rein in soaring inflation, China's central bank raised interestrates three times and hiked banks' reserve requirement ratio sixtimes last year, squeezing credit available in the market. "Whether the economic growth rate can rebound and demand canstabilize now depends on the monetary policy," Zhang said, callingfor measures to relieve the tightening effect on the economy.
"Even though we don't need to panic now as the GDP growth is stillwithin the expected range," he said. "We have to be fully aware ofthe complexity and severity of the current situation.".
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