By Li Hong, People's Daily Online
The promise by Premier Wen Jiabao over the weekend that his government will unwaveringly stick to an expansionary fiscal spending and loose banking policy in 2009 should pave way for a solid recovery in China, which will also serve as a stabilizing factor to sooth nerves abroad. That the country's economy is on track to achieve at least 7 percent growth this year is good news for all.
Although China in May attained marked progress in increasing fixed assets investment, beefing up domestic consumption, and revving up industrial growth, Beijing is not complacent. It shouldn't be. A government economist said that until other world economies, especially the United States', reverse the downturn, Beijing's efforts won't decelerate. The World Bank has estimated the U.S. economy might contract by 2.8 percent this year.
Ever since the global financial crisis was sparked in September by the shutdown of Lehman Brothers, Beijing's economic team has been put on high alert, studying the roots of the severe crisis while engineering China's policy to overcome it in the hope of finding an early exit. The recipe they charted out, including an eye-grabbing 4-trillion-yuan (US$586 billion) stimulus spending plan plus a package of industrial strengthening and overhaul programs, is one of the boldest to combat the crisis.
Now, the economy has taken an impressive turn from heavily relying on overseas demand towards domestic consumption. The feat is not trivial at all, considering Chinese people's centuries proneness to save for the rainy days while despise consumerism. The linchpin is how to sustain the dynamic of home sales. Though exports plunged by about one quarter in the first five months from a year earlier, as buyers in western countries remained jittery about placing orders, domestic consumption made up for the discrepancy. It soared by 15.2 percent in May, official statistics showed.
It seems to me that the two governments in Beijing and Washington firmly believe that only by aggressive stimulus spending, in addition to buttressing their bank system and increasing market liquidity, one's economy could find its bedrock, stabilize and retake growth momentum. Most European countries, worried about inflationary pressure, chose to sit on the sideline, waiting for their economies to correct themselves.
As a result of the proactive fiscal and loose financial policy by Beijing, Chinese investment expenditures rose 33 per cent in the first five months, from that last year. The sizzling build-up of railways, expressways, utilities and a boom in urban transformation projects throughout the country have led to a rapid shrinkage of last year's stockpiles, and rising demands for steel, cement and all other industrial products.
Beijing's GDP-friendly policies subsidizing domestic sales of autos and electric appliances have also helped. The country is expected to become the world's largest family car market, as 12 million autos will be sold by year end.
Lately, the government's decision to reignite the dormant housing market has succeeded. For the first time since the crisis broke out, would-be home owners have queued overnight to buy houses in Beijing, local press reported. The State Statistics Bureau said that during the first five months, consumers swallowed 247 million square meters of housing, rising 25.5 percent from the same period last year. The low home mortgage rates and deliberately made lower taxes on housing sales aided the real estate buying spree.
Despite these, Premier Wen Jiabao reportedly said that the central government would beef up the stimulus package if necessitated.
Beijing's aggressiveness in jerking up investment and firing up consumption is facilitated by the urge to create as many jobs as possible to allay the throes of global recession. The silver lining is that for as many as eight months, the prices have been falling, and Beijing needs not to worry about inflation now.
The article represents the author's view only. It does not represent opinions of People's Daily or People's Daily Online.