Package 'to ensure at least 9% economic growth'

By Fu Jing and Wang Bo (China Daily)
Updated: 2008-11-12 09:00

China's stimulus plans are aimed to guarantee at least 9 percent economic growth over the next two years, according to a senior State Council researcher.

"The huge new spending initiative can help achieve that," said Li Jianwei, an economist with the State Council's Development Research Center, a think-tank under the nation's Cabinet.

Li said this target could be achieved if the central government's new spending tops 300 billion yuan next year.

In fact, the stimulus package will involve around 1.1 trillion yuan in central government spending, an official close to the nation's top decision-makers told China Daily.

Li said China's slowing economy would recover in the middle of next year as a result of the stimulus package.

The policy goal is higher than the forecast made by International Monetary Fund (IMF), which last Friday said China's economic growth rate would slow to 8.5 percent from this year's estimate of 9.7 percent.

The IMF's 9.7 percent forecast is lower than China's annual average of 9.8 percent growth achieved over the past three decades.

Zhang Xiaojing, a senior economist at the Chinese Academy of Social Sciences, said the stimulus package could have an "immediate effect" on the economy by the end of this year.

Zhang expected year-on-year economic growth of less than 9 percent in the final quarter of this year and estimated that China's GDP growth would be higher than the IMF's estimate of 8.5 percent in 2009.

"Because of the huge government spending, this quarter's real investment can be as high as that of last year," said Zhang, who heads a macroeconomic research team at the academy.

Warning that a "deficit is unavoidable" due to a slide in government revenues this year and expansive spending in 2009, Li said the authorities should consider issuing government bonds to attract more investment in infrastructure construction.

Zhang said the government should issue bonds worth 200-300 billion yuan.

"The situation today is different from 1997 and 1998 when the financial crisis hit Asia," said Zhang. "Our financial revenues are much higher than ten years ago."

China implemented a proactive fiscal policy between 1998 and 2003 and issued government bonds worth around 800 billion yuan to support this.

"This time the scale should not be that much," said Zhang.