Backgrounder

Uncertainties still weigh on China's economy

(Xinhua)
Updated: 2009-11-30 14:31

China has vowed to maintain its macroeconomic policy stance in 2010 despite worries that its stimulus is likely to risk fueling new bubbles and overcapacity.

A meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee agreed Friday that the country will continue the proactive fiscal policy and moderately easy monetary policy next year.

"It is a must for the country to stick to the pro-growth policy stance," said Zhang Liqun, a researcher with the Development Research Center of the State Council, one of China's top think tanks.

"A guarantee to the 8-percent growth target this year does not mean the national economy has been on an independent and stable developing track," Zhang said.

Many uncertainties, both at home and abroad, still weighed on China's economy and it was quite necessary for the government to maintain its policy stance, said Feng Fei, a senior researcher at the Development Research Center of the State Council.

China's economic growth has approached its pre-crisis level a year after the adoption of the 4-trillion-yuan (585.6 billion) economic stimulus package.

The country's economy grew 8.9 percent year on year in the third quarter this year, accelerating from 7.9 percent in the second quarter and 6.1 percent in the first quarter. In the third quarter last year, it increased 9 percent year on year.

However, the country's strategy has raised concern that loose money could inflate prices of stocks and housing, build up unneeded factories and saddle the economy with bad debts.

Although the current stimulus package had side effects, it was not the time for retreat, said Zhuang Jian, a senior economist with the Asian Development Bank.

The government should be aware of the hidden trauma in economic growth and be ready at all time for popping-up problems by improving the policy flexibility, he said.

It was important to enhance the flexibility and focus of macro regulation, considering the inflationary expectations, assets bubble risk and rapidly changing economic situation, Feng said.

The Political Bureau vowed to enhance the focus and flexibility of economic policy in the following year according to new situations. It would also further implement and enrich the economic stimulus package to make the economy grow in a more stable, balanced and sustainable way.

Bureau members agreed the government would maintain continuity and stability in its macroeconomic policies, according to a statement released after the meeting.

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The barely-changed wording in the statement of the meeting, convened ahead of the annual Central Economic Work Conference, would set the tone for next year's economic work, said Wang Tongsan, a senior researcher with the Chinese Academy of Social Sciences.

He noted that the "five highlights" in the statement would be mid- and long-term strategy for economic and social development in China, which would enable the country to grab the opportunity during the crisis.

The country would step up efforts to improve the quality and efficiency of economic growth, to promote the transformation of the economic development pattern and structural adjustments and to promote innovation and reform and opening up to enhance the vigor and momentum of economic growth, the statement said.

It also urged more efforts to improve people's livelihood and maintain social stability, and to coordinate the domestic and international situation.