March 5 (Bloomberg) -- Premier Wen Jiabao said China’s 8 percent growth target for this year is within reach, indicating the government doesn’t see the need to increase a 4 trillion yuan ($585 billion) economic stimulus.

It’s “possible for us to meet this target,” Wen told delegates in his annual speech to China’s parliament in Beijing today. The nation needs to “reverse the economic slide as soon as possible.”

Wen’s prediction that China will ride out a global recession and his pledge to “significantly increase” investment helped the Shanghai Composite Index to add to its biggest rally in four months. Collapsing exports have dragged the world’s third-largest economy to its weakest growth in seven years and cost the jobs of 20 million migrant workers.

“They are keeping ammunition in reserve,” said Stephen Green, head of China research at Standard Chartered Plc in Shanghai. “Every day the world economy gets worse and they’ve probably got two years of very slow global growth to get through.”

Stocks climbed around the world yesterday after former statistics bureau head Li Deshui said Wen would announce new stimulus measures today in the equivalent of a U.S. State of the Union address. The Shanghai index closed 1 percent higher today after surging 6 percent yesterday.

The 8 percent growth target compares with the International Monetary Fund’s forecast that the nation’s economy will expand 6.7 percent, the least in almost two decades.

‘Policy Complacency’

“We would continue to highlight the risk of policy complacency,” said Frank Gong, head of China research at JPMorgan Chase & Co. in Hong Kong. “Policy makers appear to be satisfied with the recent initial -- yet still quite fragile -- recovery in the economy.”

With 20 million rural laborers who previously found jobs in cities now unemployed, and 7.1 million college graduates seeking work, authorities are alert to the danger of social unrest.

The drop in China’s growth rate has put “severe pressure” on employment, Wen said. “We face unprecedented difficulties and challenges.”

The government said it will boost 2009 public security spending by 32.6 percent to 116 billion yuan, mostly to maintain stability in the country’s western and central regions.

Record Budget Deficit

The 2009 budget deficit was set at a record 950 billion yuan as the slowdown cuts revenue and the government keeps spending. Tax cuts already in place will save companies and households 500 billion yuan this year, the budget showed.

The deficit, up from 111 billion yuan last year, is forecast to be within 3 percent of gross domestic product, compared with a 12 percent shortfall budgeted by the U.S.

Fitch Ratings affirmed China’s long-term foreign currency debt rating at A+, the fifth-highest grade, citing “an exceptionally strong external balance sheet.”

Ben Simpfendorfer, an economist at Royal Bank of Scotland in Hong Kong, said it was “difficult to distinguish between today’s package and previously announced packages.” Still, the spending would be enough to spur a recovery in the second half, he said.

“Everybody was prepared for the announcement of new spending measures and they haven’t delivered,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. “They will not reach their 8 percent growth target. It’s quite disappointing.”

‘Very Confident’

Fiscal spending will rise 22 percent this year to 7.62 trillion yuan, a smaller increase than last year’s actual 25.4 percent gain, Wen said.

Statistics bureau head Ma Jiantang said he was “very confident” that China could achieve its growth target, citing the third monthly increase in the official manufacturing index in February.

While China’s economy is the only one of the world’s five biggest still growing, the pace has slowed for six straight quarters. The expansion in the three months through December was 6.8 percent from a year earlier, compared with 13 percent for all of 2007.

Public spending, mostly on infrastructure, will more than double to 908 billion yuan, Wen said. Spending on social security and employment will rise 22 percent to 335 billion yuan.

Low-Cost Housing

The medical and health budget will climb 38 percent to 118 billion yuan. The allocation for welfare homes and low-rent housing will almost triple to 49.3 billion yuan.

China is targeting inflation of 4 percent, compared with an actual rate of 5.9 percent in 2008, Wen’s report showed.

The global financial crisis “is still spreading and is yet to bottom out,” the premier said, adding that a trend toward global deflation was becoming more obvious. Trade protectionism is rising, he added.

Wen’s report contrasted with a year earlier, when he pledged to rein in lending and growth in money supply to cool inflation. This year, the government spurred record new loans in January by pressing banks to support the stimulus program.

This year’s target for new loans is “more than 5 trillion yuan” up from last year’s 3.6 trillion yuan, Wen said. Banks’ actual new lending in 2008 was 4.9 trillion yuan.

China’s banks extended more than 800 billion yuan of new loans in February, Liu Mingkang, head of the China Banking Regulatory Commission, said today. That’s more than triple lending a year earlier.

The government stimulus plan announced in November spans spending through 2010 on public housing, railways, highways, airports, power grids and earthquake reconstruction work.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net

Last Updated: March 5, 2009 02:30 EST