China doesn't need provisional stimulus to keep stable growth

The 7.5 percent of GDP growth rate in second quarter means that the economic target set at the beginning of this year is met and overall policy for the next phase will turn to restructuring, reform and macroeconomic transformation. But we must realize that a stable economic growth is the prerequisite for restructuring.

Chinese Premier Li Keqiang pointed out that China won’t use provisional government stimulus to offset the pressure of economic downturn.

In wake of global financial crisis, Chinese government adopted a big stimulus package worth 4 trillion yuan to stabilize economy from the end of 2008.

The package helped China get out of woods ahead of many countries, thanks to government-led investments and credit-fueled boom. Behind the rapid economic recovery, the country gets into the mire of side-effects of stimulus plan such as industrial overcapacity and low investment efficiency.

Compared to four years ago, the situation has changed so that Chinese policy-makers are thinking differently to curb the current economic difficulties, said Fan Jianping, top economic predictor of China’s State Information Center.

The wide-range stimulus program was necessary considering the fact that China’s GDP growth rate had dived to the dangerous level in 2009. There is no such danger in current economic development, so the policy should concentrate on restructuring and reform.

The central government has rolled out and will continue the mild stimulus to ensure the annual GDP target and employment mission, said Lian Ping, top economist of China’s Bank of Communications.

Compared to other prioritized fields, investment has ample policy room and needs stimulus most. But the spending spree will not resurge and the focus will shift to project approval and credit rules.

In addition to conventional infrastructure projects such as railway and road, government’s money will also go into “reasonable” projects in energy and shipping. “Credit control will remain adequately loose, but to avoid risk, it will not be too loose,” said Lian.

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