Chinese Premier Wen Jiabao said easing inflation allows more room to adjust monetary policy and positive signs are emerging in the economy, expressing confidence after July data showed a further slowdown in growth.
“We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets,” Wen said during a two-day inspection tour to the eastern province of Zhejiang, the official Xinhua News Agency reported yesterday. He said downward pressure on the economy remained “relatively large,” according to state radio, and state television reported him as saying there’s “growing room for monetary policy operation.”
The comments may bolster speculation China will cut banks’ reserve requirements or benchmark interest rates again after inflation slowed to a 30-month low in July, export growth collapsed and new yuan loans trailed estimates. Zhejiang, an export base, is among the hardest-hit regions by the economic slowdown.
“Policy makers have made clear in recent weeks that supporting economic growth is their central concern,” Qinwei Wang, an economist at Capital Economics Ltd. in London, said in an e-mail. “We continue to think that more policy support will be announced soon, including a further cut to the required reserve ratio, and that more infrastructure projects proposed by local governments will be given the go-ahead.”
Wang is a former employee People’s Bank of China, according to his profile on Capital Economics’ website.
The reports yesterday didn’t specify which targets China will meet, including the 7.5 percent goal for gross domestic product growth set in March. Expansion was 7.8 percent in the first half, and Deutsche Bank AG last week lowered its third- quarter forecast to 7.5 percent from 7.9 percent.
“In the recent months, especially since July, there are some positive changes in the economy,” said Wen, 69, as cited by state television. Domestic demand is showing greater effect in supporting economic growth, industrial output in eastern Chinese regions is picking up and China’s job market remains stable, he said.
Another of the so-called BRIC countries, Brazil, yesterday announced measures to aid growth. The government of Latin America’s largest economy will sell licenses to build and operate roads and railways requiring as much as 133 billion reais ($66 billion) in investments over 30 years.
Brazil will sell licenses for private companies to operate 7,500 kilometers (4,660 miles) of roads and 10,000 kilometers of railways, Transport Minister Paulo Sergio Passos said during a ceremony in Brasilia. The country’s BNDES state development bank will provide as much as 80 percent financing for the projects.
In China, consumer prices rose 1.8 percent in July from a year earlier, the government said last week. Exports increased 1 percent, after an 11.3 percent rise in June. New local-currency lending was 540.1 billion yuan ($85 billion), lower than all 30 estimates in a Bloomberg News survey, compared with 919.8 billion yuan the previous month.
China has cut the reserve-requirement ratio for banks three times starting in November and lowered interest rates in June and July while accelerating approvals of investment projects.
Wen said his trip was intended to “enhance confidence.” China’s existing policies, including the two rate cuts, “have, and will continue to, play an important role in promoting economic development” and people’s livelihoods.
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