Wen Says China’s Economic Recovery Yet to Show Momentum
China’s Premier Wen Jiabao warned that the nation’s recovery is yet to build up momentum, fueling speculation that extra economic support measures may be announced after a cabinet meeting this week.
“It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” Wen said during an inspection tour in southwest Sichuan province, according to a Chinese-language report from the official Xinhua News Agency yesterday. At the same time, expansion is within the targeted range and measures to stabilize growth are “bearing fruit,” he said.
China’s State Council may this week give details of easing measures to support growth after provincial visits by Wen and Vice Premier Li Keqiang to check on the economy, Nomura Holdings Inc. said in a note today. The China Securities Journal reported that a meeting as early as July 18 may be followed by policy steps, citing unidentified analysts.
“The State Council meeting may help shed some light on specific policy easing measures,” said Zhang Zhiwei, a Hong Kong-based economist for Nomura.
China’s stocks fell, dragging down the benchmark index by the most in a week, on concern about the falling profits of companies such as ZTE Corp. (000063), the nation’s second-biggest maker of telecommunications equipment. The Shanghai Composite Index fell 0.9 percent to 2,165.64 at 10:35 a.m. local time.
“We need to comprehensively assess the situation and recognize the problems, difficulties and risks, in particular the downward pressure on the economy,” Wen said.
The government will step up policy fine-tuning in the second half to support growth, he said, reiterating comments he made during a visit to eastern Jiangsu province earlier this month.
China’s gross domestic product rose 7.6 percent in the second quarter from a year earlier, the statistics bureau said on July 13, the sixth straight slowdown. Industrial production increased at a more moderate pace in June while retail sales growth decelerated, the data showed.
Nomura cut its China growth forecasts after the data. The bank now estimates expansion of 8.2 percent this year rather than 8.4 percent, and a pace of 7.9 percent in 2013, down from an earlier prediction of 8.2 percent.
Wen in March set a 2012 growth goal of 7.5 percent, down from an 8 percent target in place since 2005.
Separately on July 13, the People’s Bank of China said weak global demand will hinder growth, with the world situation “extremely” complicated, according to the central bank’s 2012 financial-stability report.
The PBOC announced the second cut in interest rates in a month on July 5 and has reduced banks’ reserve requirement ratio three times starting in November.
During his visit to Jiangsu, Wen pledged to “unswervingly” sustain property controls and prevent a rebound in prices. Yesterday’s report on the premier’s tour in Sichuan from July 13 to 15 didn’t contain any reference to the real- estate market or property prices.
At an economic forum in Chengdu on July 14 with officials from five central and western provinces, Wen said the “fundamentals for economic development remain sound” and that “many bright spots are emerging in the course of development,” according to Xinhua. “The drivers and potential for economic growth are still relatively large,” he said.
The “bumper harvest” over the summer has provided a solid foundation for stable economic growth, helping to stabilize prices, Wen said. The monthly deceleration in prices “gives the government more scope for macro-economic controls,” he said.
Inflation eased to 2.2 percent in June from a year earlier, the lowest rate in 29 months, while producer prices fell for the fourth month, government reports on July 9 showed.
China “must do everything possible” to expand jobs, paying particular attention to the employment of college graduates, Wen said, according to Xinhua.
The government will pay more attention to encouraging growth of private enterprises and provide financial and tax support, Wen said, although he pointed out that companies must also help themselves by innovating and upgrading their products.
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