Mainland may double stimulus to 8 trillion yuan Nomura Reuters in Beijing 3:21pm, Feb 25, 2009
Beijing may soon announce a doubling of its stimulus package to 7-8 trillion yuan, putting the country on track to hit its growth target of 8 per cent this year, Nomura’s chief China economist said on Wednesday.
Mingchun Sun, speaking at a Nomura forum in Beijing, said the 4 trillion yuan (HK$4.5 trillion) stimulus announced in November could easily be expanded to 7-8 trillion yuan because the country has vast public investment needs and the means to pay for them.
He said a formal announcement of the bigger spending plan could come in March during the annual parliament meeting or around the time of the April 2 summit in London of the Group of 20 developed and emerging economies.
“It should be announced because it is very good for boosting confidence,” he said.
A series of comments by top mainland leaders this week has hinted at the possibility of fresh spending pledges.
President Hu Jintao said on Tuesday that mainland would take stronger steps to boost domestic demand. The Communist Party’s Politburo, a 25-member elite council, said on Monday that it would ramp up investment to support growth.
Mr Sun noted that the original stimulus announcement had unleashed a flood of investment proposals by local governments, totalling about 18 trillion yuan.
He said the National Development and Reform Commission, the country’s top economic planning agency, would approve only a portion of these.
But their combined cost would probably top the 4 trillion yuan target, as many worthwhile infrastructure projects were held back in recent years when the government was trying to tame runaway growth.
In addition, Mr Sun said a surge in bank lending in January showed that mainland’s financial system was well placed to deliver credit in support of public investment.
“Looked at from the perspective of demand and financing capacity, I don’t think it will be a big problem to get to 7-8 trillion yuan,” he said in estimating the size of the eventual stimulus. “It could be even higher.”
Mr Sun forecast two years ago that the country would slow to 8 per cent growth this year when the market consensus was nearer 10 per cent.
The consensus has shifted sharply downward over the past few months. Some economists project growth as low as 5 per cent this year, but Mr Sun is standing by his 8 per cent forecast.
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