BEIJING (Reuters) - Evidence is mounting that China might launch a massive economic stimulus package in the near future as worries over a sharp slowdown in the world’s fourth-largest economy intensify, officials said on Friday.
From media reports to comments by government economists, speculation is swirling that Beijing would soon work out a comprehensive and aggressive plan soon to boost its sagging economic growth rate.
What lends more ammunition to the speculation is that China Finance Minister Xie Xuren earlier this week left the Asia-Pacific finance ministers’ conference in Peru suddenly before the gathering got underway.
He also canceled his attendance at the G20 meeting in Sao Paulo, Brazil, leaving his deputy, Li Yong, to represent the Chinese Finance Ministry.
Official sources said he was summoned back to Beijing by his bosses to discuss important and urgent policies.
“What China urgently needs do to is to greatly shore up fiscal stimulus, which should not be too timid,” said one of the sources, speaking on condition of anonymity.
Premier Wen Jiabao has said that the biggest contribution China could make to help the global economy weather the worst financial crisis since the Great Depression is to maintain a fast pace of economic growth.
The world is watching intently to see what China will do to spur domestic consumption and keep expanding, which will help inject energy into its trade partners and bolster commodity markets.
In a telephone conversation with British Prime Minister Gordon Brown on Friday, Wen said that the global crisis requires joint efforts and China would play an active and constructive role, according to a statement posted on the Chinese Foreign Ministry’s website.
“China has and will roll out a slew of measures to further spur domestic consumption to safeguard economic, financial and capital market stability,” Wen said.
To shield China from the heavy blow of the global crisis, Beijing has launched a series of measures, including three interest rate cuts in six weeks, increased export tax rebates and more incentives for home buyers.
A source who declined to be identified, as they are not authorized to speak to the media, said that what Beijing has done was far from enough.
“The forces of a stimulus should be big enough and we shouldn’t adopt a conservative stance on this,” he said.
“We should be decisive now as this is an unusually urgent situation,” the source added.
He also said that recent gloomy forecasts by many investment banks and research institutions about China’s growth have stoked the worries of policy-makers, who are now more inclined to take swift action.
Credit Suisse early this week lowered its forecast for 2009 Chinese economic growth to 7.2 percent, adding to a chorus of a group of banks that anticipate a slowdown to below 8 percent -- a level of growth China has vowed to safeguard.
Most countries would be pleased with 8 percent growth, but for rapidly urbanizing China, experts say it represents a tipping point below which it may not be able to create enough new jobs or raise incomes sufficiently to maintain social stability.
China’s annualized growth slowed to 9 percent in the third quarter from 11.9 percent for 2007, putting the economy on track for its first year of less than double-digit expansion since 2002.
The official China Daily cited a cabinet official as saying that a proposal about a radical stimulus package had been submitted to the top leadership.
China should launch extensive infrastructure and clean energy projects, increase employment and be bold in raising export tax rebates to spur foreign trade, the official told the paper.
The paper has also reported that about China might spend 5 trillion yuan ($732.5 billion) on roads, waterways and ports in the next three to five years, 2 trillion yuan more than its original budget.
($1=6.82 Chinese yuan)
Reporting by Beijing Newsroom