Wen orders support for stocks, homes
Premier Wen Jiabao has ordered efforts be made to support the property and stock markets and carmakers, saying they were crucial to sustaining the economic recovery, at least in the short term.
Mr Wen also said the central bank should keep the credit tap fairly wide open to support big government spending.
He made the statements in an internal meeting last month with the economy and finance ministers and executives of big state-owned companies, according to informed sources.
This week, the premier warned that the current economic recovery was not built on solid foundations.
He held two meetings to consult economic experts and industrial officials on economic policy, Xinhua reported. In the meetings on Tuesday and Thursday, Mr Wen said that maintaining stable and relatively rapid economic growth was the government's top priority, the official news agency said.
Xinhua said Mr Wen held the meetings to canvass opinions and seek suggestions regarding economic development.
A reliable source quoted Mr Wen as saying in last month's meeting that 'the government should spare no effort in maintaining the stability of stock and property markets and boosting spending on big items such as homes and cars.'
The source said: 'The top leadership believes that spending on those big items will be crucial to maintaining economic stability and growth, at least in the short term, in view of the continued global downturn.'
The source, who was at the meeting with Mr Wen, said the authorities would ensure plentiful bank lending and use fiscal measures to support the recovery of key industries because demand for mainland exports was likely to remain weak for some time to come.
Mr Wen acknowledged that such high spending might not be sustainable over the long term. He said that with the economy on the path to recovery, future policies would focus more on addressing medium-term structural problems and on boosting household income and domestic consumption to ensure sustainable growth.
The mainland's two stock exchanges have been the world's best performers this year. The Shanghai Composite Index rallied 69 per cent in the first six months as improving credit, investment and manufacturing data suggested the government's 4 trillion yuan (HK$4.54 trillion) stimulus package - announced in November to counter the impact of the global financial crisis and economic downturn - was reviving the mainland economy.
Property sales and prices in the mainland have started to recover, driven by pent-up demand and supportive government policies. Property prices in 70 large and medium-sized cities rose 0.2 per cent in June from a year earlier, the first increase in six months, according to results of a survey by the National Development and Reform Commission and National Bureau of Statistics issued yesterday.
The mainland surpassed the United States as the world's biggest vehicle market in the first half of the year. June vehicle sales were up 36.5 per cent from a year earlier, at 1.14 million. That was the second highest on record; in April, 1.15 million were sold. Vehicle sales in the first half of the year reached 6.1 million, up 17.7 per cent from a year earlier, the China Association of Automobile Manufacturers said on Thursday.
While there is growing consensus among analysts that the world's third largest economy is on track to recover, some officials and academics have voiced concern an asset bubble is building up and that inflation may take off. On Tuesday, Zhang Jianhua , head of the People's Bank of China's research bureau, said some 'fine-tuning' was necessary to prevent asset bubbles, bad-loan risks and a return to high inflation.
