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People's Daily Online>>China Business

Spending by govt may boost economy

By Cynthia Chen (China Daily)

08:57, December 14, 2011

BEIJING - The government has room for maneuver on the economic front if the US outlook does not improve and Europe remains mired in the debt crisis, a deputy chief of the World Bank said.

"Government spending, rather than bank lending, may be used to boost the infrastructure and manufacturing sectors to ensure economic expansion in 2012," Lin Yifu, the World Bank's senior vice-president and chief economist, said in an interview with China Daily.

Lin acknowledged that the eurozone's worsening sovereign debt crisis as well as the sluggish US economy would take a toll on the world's second-largest economy in the coming year. But a hard landing is unlikely, he said, and predicted that GDP growth will stay above 8 percent in 2012.

He was speaking as senior Chinese leaders held their annual Central Economic Work Conference in Beijing to hammer out a framework for 2012 economic policies.

President Hu Jintao said last week that the country will maintain robust economic growth in the year ahead. Prudent monetary and proactive fiscal policies may come more into play.

However, a slight shift in macroeconomic policies is possible, considering that inflation has eased, analysts and economists have suggested.

The November consumer price index (CPI), a main gauge of inflation, declined sharply to 4.2 percent, the year's lowest, from a 37-month high of 6.5 percent in July, according to the National Bureau of Statistics. Economists predict that inflation in 2012 may drop to less than 4 percent.

Wang Tao, head of China economic research at UBS Securities, expected slightly more flexibility.

"The government is likely to target 8 percent GDP growth and 4 percent inflation in 2012, supported by a proactive fiscal policy and a stable monetary policy," she said.

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