Wen seeks to dispel doubts on stimulus
Premier Wen Jiabao tried yesterday to dispel lingering doubts about China's 4 trillion yuan (HK$4.54 trillion) economic stimulus package, as an expectant world watched and wondered how the third-biggest economy would help reverse the global downturn.
Addressing the media after the National People's Congress, Mr Wen clarified the components and funding sources of the scheme, first unveiled in November, albeit with few details.
The clarifications come as economists struggle to measure the magnitude of Beijing's stimulus efforts and assess their possible impact on the economy.
'The package includes large-scale government investment, industrial restructuring and revival, technology upgrades and schemes to improve social welfare,' Mr Wen said.
'Of this, government spending is the most direct, forceful and effective measure. It involves 1.18 trillion yuan of direct investment from the [central] government. [The spending] also comprises bank loans, private investment and other funding.
'I can assure you that the 1.18 trillion yuan is totally new investment, which will be used to improve livelihoods, technology, environmental protection and infrastructure.'
When the stimulus package was first announced in September, there was major confusion over the programme, given that some of the infrastructure projects in the package were previously included in the five-year 2006-2010 blueprint.
Mr Wen admitted that some projects, including road and railway construction projects, were in the original five-year plan. But because Beijing had to launch the stimulus quickly, it tried to minimise risk by choosing projects that were already fully examined, he said.
Some measures announced last week in the 2009 government work report were not part of the 4 trillion yuan package. They included higher pensions for retired workers, pay rises for 12 million teachers, subsidies for farmers, 600 billion yuan in tax exemptions and reductions, and 850 billion yuan set aside for medical reform over the next three years, Mr Wen said.
Chinese Academy of Social Sciences researcher Zhang Xiaojing said Mr Wen had outlined the stimulus package but the main features, like how and when the money would be spent, were still vague.
Merrill Lynch economist Lu Ting was more optimistic, saying the commitments showed the central government's seriousness about tackling economic problems.
'I see Premier Wen's promises about the stimulus package as [demonstrating] the central government's determination to prod the economy. We can see that Beijing is really serious about the plan and has the capacity to implement it,' Mr Lu said.
HSBC economist Qu Hongbin said the scale of the investment was not a concern because China was not short of money.
The mainland's fiscal deficit stood at 180 billion yuan last year, or 0.8 per cent of gross domestic product, down from 319.8 billion yuan or 2.6 per cent of GDP in 2003.
The small proportion indicated the nation's sound fiscal health despite a series of tax cuts and mainland companies posting lower revenue.
Mr Wen said yesterday that the deficit was at a controllable level and the debt level was safe, thanks to efforts to cut the deficit in recent years. The budget deficit for this year is a record 950 billion yuan, equivalent to 3 per cent of GDP, a level still widely regarded as within safe limits.
Six of the best
Key quotes from Premier Wen Jiabao's annual press conference
China's stimulus package hasn't been fully understood by the world
Rumours and misunderstanding [about the package] set stock markets on a roller-coaster ride
Of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries
I believe that there will indeed be some difficulty reaching this goal [of 8 per cent growth]
The Dalai Lama runs around the world and is able to intoxicate some in the political world
I would still like to go to Taiwan. If I can no longer walk, I wouldn't mind crawling
Sources: Xinhua, Reuters