Bold China sees signs of recovery

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Bold China sees signs of recovery
http://www.ft.com/cms/s/0/9e61eb9e-0a6d-11de-95ed-0000779fd2ac.html

By Jamil Anderlini in Beijing Published: March 6 2009 16:58 | Last updated: March 6 2009 16:58

China’s top economic officials said they saw signs of economic recovery thanks to government efforts to boost growth, but analysts warned Beijing might be getting complacent as it tried to shore up confidence amid a pronounced slump.

“We can see the economic figures are already stabilising and recovering, which shows the [government’s stimulus] policies have started to take effect,” Zhou Xiaochuan, China’s central bank governor, said at a press conference on Friday on the sidelines of the annual meeting of the country’s rubber-stamp parliament.

His optimism was echoed by Xie Xuren, the finance minister, and Zhang Ping, chairman of the National Development and Reform Commission, the country’s powerful economic planning agency.

“The measures taken have been positive and efficient,” said Mr Zhang.
“They have been very effective in stopping the slowdown in economic growth, in overcoming the difficulties of enterprises and in expanding consumption.”

He said some export sectors were showing signs of recovery but a Chinese newspaper reported on Friday that exports and imports both fell more than 20 per cent in February. Exports fell 17.5 per cent and imports fell 43.1 per cent in January.

In the southern province of Guangdong, China’s biggest manufacturing and export hub, exports fell at a slower pace last month than in January, according to the province’s governor.

“Our exports dropped 31 per cent in January, and still fell by another 20 per cent in February,” said Huang Huahua.
He added the provincial government hoped to avoid negative export growth for the full year. “With zero per cent growth in exports, we can still achieve our growth target of 8.5 per cent [for 2009],” he said.

“The government is really complacent and that worries me,” said Frank Gong, head of China research for JPMorgan.
“They seem to be satisfied with the performance of the economy but the worst is yet to come in export performance, deflation is imminent and to sustain the current fragile recovery they need to provide more policy stimulus.”

Since late last year, Beijing has announced a series of initiatives to stimulate the economy, including a vaguely defined Rmb4,000bn ($585bn, €465bn, £414bn) “investment plan” which focuses on building infrastructure and improving social services.

The government will fund only about a quarter of the Rmb4,000bn plan, with local governments, state and private companies and state-owned banks expected to pay for the rest.

Much of the planned investment was already in the pipeline but has been accelerated, and analysts who have studied China’s 2009 budget say the new money attributable directly to the stimulus plan probably amounts to Rmb400bn this year.

The government has also announced Rmb500bn in projected tax cuts but analysts say this may not be enough for the government to hit its 8 per cent gross domestic product growth target for the year.

“The government is starting to believe its own propaganda,” said an analyst who asked not to be named for fear his employer would lose business in China. “Their projections for fiscal revenue are overly optimistic.”

Li Deshui, the former statistics bureau chief who moved markets around the world on Wednesday with comments about an imminent new Chinese stimulus package, told reporters yesterday he had been misquoted and there was no need for big new stimulus measures.

“The Chinese economy is not in recession and will not enter recession,” Mr Li said at a press conference. “Open your eyes and take a look, which country in the world has economic growth as high as China? I can say with confidence that 8 per cent growth will be realised.”

Additional reporting by Kathrin Hille

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