China urges local governments to speed up spending to support the economy
BEIJING (Reuters) - China urged local governments on Thursday to speed up spending this year's budget to support economic growth but said it would keep overall policy stable and focus on pushing through reforms.
Beijing is reluctant to take broad action to stem a slowdown in the economy, such as relaxing monetary conditions, but analysts said there had been signs of more targeted measures in recent days, such as expanded lending to small businesses and the agricultural sector.
Premier Li Keqiang said on Thursday that growth in the world's second-biggest economy remained within a reasonable range in the first half of the year and the government should concentrate on reforms.
"We should focus on changing the economic model when economic operations stay within a reasonable range, and adjust (economic) structures and unleash dividends from reforms and opening up," Li was quoted by state television as saying.
As part of reforms, Chinese regulators will allow more banks to issue asset-backed securities (ABS) in a bid to activate credit to shore up the economy, industry sources said.
The Ministry of Finance, in a statement on its website, said local governments should speed up spending allocated in their budgets for this year and cut the amount of money to be carried over to the following year.
The aim was to "activate the existing fiscal funds and use limited capital to help stabilize" economic growth, the ministry said in the statement published on website www.mof.gov.cn.
"For those projects budgeted earlier this year, we should speed up fund expenditures," it said.
China has budgeted spending of 13.82 trillion yuan ($2.25 trillion) in 2013 and a deficit of about 2 percent of GDP, the ministry said in March.
The minister of finance, Lou Jiwei, said last week that Beijing would not implement large-scale fiscal stimulus this year but would fine-tune policies to support economic growth on the premise of keeping the size of the fiscal deficit unchanged.
China reported on Monday that economic growth slowed to 7.5 percent in the second quarter, putting pressure on Beijing to quicken reforms to take up the economic slack.
The International Monetary Fund urged Beijing on Wednesday to push forward with reforms in order to ensure continued successful economic growth.
The industry sources said that China's big banks would be allowed to issue ABS and a quota on such issuance would be scrapped, citing new rules being formulated by the China Banking Regulatory Commission (CBRC) and the China Securities Regulatory Commission (CSRC).
An interbank cash crunch has underscored the central bank's reluctance to pump more money into the economy and banks have been told to better use existing credit through financial innovations such as asset securitization.
On Tuesday, Premier Li urged caution about rushing to change economic policy to revive sputtering growth, but he also signaled Beijing was prepared to take action if the economy slips too far.
A Reuters poll released on Thursday showed China is on track to hit its annual growth target of 7.5 percent this year, though the economy is unlikely to gain traction next year as the government trades short-term growth for long-awaited reforms.
(Additional reporting By Xiaoyi Shao and Jonathan Standing; Editing by Susan Fenton)
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