New China stimulus tranche less than expected

BEIJING (Reuters) - China’s central government will spend 70 billion yuan ($10.3 billion) in the third tranche of its stimulus package, falling short of market expectations, a Chinese newspaper has reported.

Investment in sectors that have stronger prospects will be scaled back, an unnamed official at the National Development and Reform Commission, the country’s top planning agency, was quoted as saying by the Chinese-language Economic Observer.

It did not specify any sectors but said that the government would continue to lend ample support to those in which private investment remained insufficient.

The China Securities Journal had reported last week that the central government would allocate more than 130 billion yuan in the third tranche.

The smaller investment reflected adjustments to the stimulus program and did not mean that the central government’s finances were under pressure, the Economic Observer cited the planning official as saying.

Chinese Premier Wen Jiabao said earlier this month that the results of stimulus policies have been better than expected.

Commercial banks have also more than answered the government’s call to boost lending, making an astonishing 4.58 trillion yuan in new loans in the first quarter, close to the government’s minimum target of 5 trillion yuan for the full year.

The smaller stimulus tranche could also be because officials are still in the planning stage of many investment projects and are not ready to break ground on them, the Economic Observer added.

The central government invested 130 billion yuan in the first quarter as the second stimulus tranche after spending 100 billion yuan in the fourth quarter last year. Total investment by the central bank would amount to 300 billion yuan if the Economic Observer report is accurate.

The central government has promised to contribute 1.18 trillion yuan to the 4 trillion yuan, two-year stimulus package to combat the economic slowdown, with the remainder coming from local governments, banks and companies.

China’s economy grew at an annual pace of 6.1 percent in the first three months of this year, its weakest quarter on record, but analysts said that it actually rebounded strongly on a quarter-on-quarter basis.

($1=6.825 Yuan)

Reporting by Simon Rabinovitch; Editing by Alex Richardson