* Premier Wen reaffirms 8 pct growth goal for 2009
* No mention of increase in fiscal stimulus package
* Budget gap projected at within 3 pct of GDP
By Jason Subler and Simon Rabinovitch
BEIJING, March 5 Premier Wen Jiabao said China
would ramp up its budget deficit to hit the government's
coveted 8 percent growth target but did not make the
announcement markets had craved of an increase in its 4
trillion yuan ($585 billion) economic stimulus plan.
In his annual work report on Thursday to the National
People's Congress, the largely ceremonial parliament, Wen said
the 2009 growth goal was realistic despite a deepening global
"It needs to be stressed that in projecting the GDP growth
target at 8 percent, we have taken into consideration both our
need and ability to sustain development in China," he said.
"As long as we adopt the right policies and appropriate
measures and implement them effectively, we will be able to
achieve this target."
Global markets soared on Wednesday on speculation that Wen
would add to the stimulus plan unveiled in November to head off
a rise in unemployment that could threaten the social stability
prized by the ruling Communist party.
Wen said China's budget deficit this year -- 950 billion
yuan -- would jump to almost 3 percent of national income from
0.4 percent in 2008. By comparison, the United States is
planning for a deficit of 12.3 percent of GDP this year.
Investment spending, covering everything from railways to
affordable housing, will double; outlays on health care will
rise 38 percent; and spending on the social safety net and
employment will go up 22 percent, according to the 2009 budget.
But Wen announced no increase in the 4 trillion yuan price
tag of November's pump-priming package to revive the world's
third-largest economy, which has been hit by a slump in demand
for its exports.
KEEPING THE POWDER DRY
Economists said they still expected Beijing to ramp up
spending if need be.
"Obviously they're looking at a global economy that every
day gets worse, so they might have decided to keep the extra
spending in their pockets," said Stephen Green, head of China
research at Standard Chartered Bank in Shanghai.
Green noted that the first investment projects to be
financed under the stimulus plan are only now being rolled out.
"So maybe we need to wait until the second quarter and see how
it pans out. They have more ammunition if they need it," he
Jia Kang, a researcher at the Ministry of Finance, agreed.
"China may have to widen the fiscal deficit further if the
economic situation continues to be weak in the second quarter,"
Jia told reporters.
Shanghai stocks displayed no disappointment that Wen did
not boost the spending package. The main index .SSEC ended
the morning up 1.8 percent.
Balancing optimism with caution, Wen said China faced
unprecedented difficulties and challenges due to the worldwide
financial crisis, which he said is still getting worse.
"Demand continues to shrink on international markets; the
trend toward global deflation is obvious; and trade
protectionism is resurging. The external economic environment
has become more serious, and uncertainties have increased
But he said China's prospects were as bright as ever.
"Neither the fundamentals of China's economic and social
development nor its positive long-term trend has changed."
Bank lending has surged in response to the stimulus plan --
Wen set an ambitious target of 5 trillion yuan in new loans
this year, just above last year's level -- and surveys of
manufacturers have perked up.
But exports have collapsed and a recovery in steel prices
has gone into reverse, suggesting to many economists that China
is not out of the woods yet.
Wen said his government would seek to prevent any threats
from social unrest, which officials have warned could flare up
as workers and farmers confront unemployment and income cuts.
Officials estimate about 20 million migrant workers have
already lost their jobs due to the closure of export-dependent
factories and a downturn in the construction industry.
"We will improve the early warning system for social
stability to actively prevent and properly handle all types of
mass incidents," he said, using the government's euphemism for
riots, protests and demonstrations.
(Reporting by Jason Subler, Simon Rabinovitch, Ben Blanchard,
Emmma Graham-Harrison and Zhou Xin; Writing by Alan Wheatley
and Chris Buckley; Editing by Ken Wills & Jan Dahinten)