China determined to grow despite grim global economy

China determined to grow despite grim global economy

Laying out a blueprint for the world’s second-biggest economy in the year ahead, Beijing promised to keep monetary policy "prudent," fiscal policy "pro-active" and consumer prices stable — language broadly in line with previous commitments.

Economists said the rhetoric suggested Beijing preferred to only fine-tune economic policies, rather than swing into an outright monetary easing mode to shore up growth, which is expected by many analysts to slip below 9 percent next year for the first time
in over a decade.

The pronouncements doused some investor hopes for promises of more explicit measures to lift the economy, pushing the Shanghai stock market down 0.9 percent on Wednesday to close at a 33-month low.

"It seems the government, at least for now, is not ready to conduct a blanket policy relaxation," said Tang Yunfei, an economist with Founder Securities in Beijing.

"But it also made clear that the policies will be flexible, which means the government will react when slowdown trends are clear."

Indeed, China’s view on the global economic backdrop flagged the policy challenges that could lie ahead for an economy in which trade plays a central role.

"Looking into next year, the trend in the global economy on the whole is grim and complicated," said a statement published by the official Xinhua news agency after the annual conference.

"Uncertainties are rising around a recovery in the world economy."

Beijing’s wish to downplay those risks domestically was apparent in all economic plans outlined, which broadly endorsed a decision by China’s top leaders last week to avoid big policy changes before a critical leadership succession in 2012.

The yuan will be kept "basically stable"; interest rate and exchange rate reforms will continue; measures aimed at calming the property market will be kept; exports will be held steady whilst imports boosted to balance trade.

"Stability means to maintain basically steady macro-economic policy, relatively fast economic growth, stable consumer prices and social stability," one of several statements carried by the official Xinhua news agency said.

Economists say policy fine-tuning is already under way. Data showed Chinese banks made 562 billion yuan of new loans in November, a shade more than forecast as Beijing gently eases tight credit conditions.

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Posted by Hassan Ali on Dec 14 2011. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry