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Experts warn on economic stimulus policies

By Chen Jia and Hu Yuanyuan  (China Daily)

06:49, May 31, 2012

A large package of stimulus policies to simply promote investment projects would be "dangerous" for the weakening Chinese economy as the excess production capacity may result in more serious economic fluctuations, economists warned.

Beijing's recent new set of demand-boosting policies has raised economists' worries about a repeat of the side-effects brought by the 4 trillion yuan ($630 billion) stimulus package launched in 2008.

"The key problem for Chinese companies is the overly competitive environment thanks to excess production capacity, rather than a lack of capital," said Pan Jiancheng, deputy director-general of the China Economic Monitoring and Analysis Center of the National Bureau of Statistics.

"A rough expansion of investment may offer temporary relief, but it could result in disasters in the future," Pan said.

The deepening eurozone crisis and worse-than-expected industrial production indicators have lowered many economists' predictions about the growth rate in the second quarter.

Liu Ligang, head of China economics at Australia and New Zealand Banking Group Ltd, forecast that the manufacturing purchasing managers' index, an indicator of the operating conditions of the sector, is likely to drop to 51.1 in May from 53.1 in April.

The NBS and China Federation of Logistics and Purchasing will jointly release the latest PMI data on Friday.

"The government needs to accelerate implementing the 2012 fiscal plan, and expand public housing projects, instead of undertaking a new round of fiscal stimulus," Liu said.

In May, there have been indications that the authorities are speeding up the approval process for major projects.

The National Development and Reform Commission has approved new airport projects in provinces including Gansu, Hainan and Heilongjiang.

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