Mainland would prefer rate cuts to stimulus: officials
June 15, 2012, 5:59 pm TWN
BEIJING -- China is more likely to implement economic reform, cut interest rates and reduce bank reserve ratios to stimulate growth, rather than launch an expensive new stimulus plan, current and former officials said on Thursday.
A steeper-than-expected growth slowdown in the world's second-biggest economy galvanized policymakers last week into cutting interest rates for the first time since the depths of the 2008-09 global crisis, and further easing is expected.
Two more interest rate cuts and three more reserve ratio (RRR) cuts were possible before the end of the year, said Cao Wenlian, the former deputy director of the finance department at the National Development and Reform Commission.
China does not need another stimulus package like the huge 4 trillion yuan (US$628 billion) spending binge in 2008-09, which super-charged growth but left local governments saddled with debt, he told a conference.
Instead, recently announced “fine-tuning” policies are enough to ensure growth in an economy that is already bottoming out this quarter, said Cao, who is now deputy secretary general of the China Center for International Economic Exchange (CCIEE), a government think tank.
Former Chinese officials and members of government-backed think tanks often play an advisory role on current policies, and are often briefed on decisions or internal policy debates. CCIEE is considered one of the top think tanks in the capital.
Cao's view was echoed by He Keng, deputy head of the finance and economics committee at the National People's Congress Standing Committee, China's rubber-stamp parliament.
“The second quarter will be the hardest period and data will turn better in the third and fourth quarter with full-year growth no less than 8 percent,” He told the conference, adding that risks in the property market, high local government debt and rampant underground lending were more dangerous to the economy than the current short-term slowdown.
Weaker-than-expected economic numbers, which showed May retail sales rose at their weakest pace since February 2011 and fixed asset investment growth in the first five months at the lowest in nearly a decade, have prompted some analysts to cut their growth outlook for 2012.