The mainland leadership's decision on Friday to continue its economic stimulus measures next year was expected despite concerns over rising expectations of inflation and asset bubbles.
While preparing to pump more money into the economy in 2010, the leaders are increasingly likely to tweak the mainland's stimulus policies more often to reduce overinvestment and overcapacity, and focus more resources on boosting domestic consumption. They view that as a more important driver for economic growth than government spending and exports, as well as something that has been long urged by the mainland's trading partners.
This means the leaders will have to greatly expand and improve the current policies to boost consumption, which have focused on automobiles and the property market. Soaring property prices have heightened concerns about asset bubbles and generated widespread dismay among ordinary mainlanders.
As with past practice, the Communist Party's decision-making Politburo met on Friday to set the tone and guidelines for the upcoming annual national economic conference, where the country's top economic planners and local officials will discuss and hammer out detailed economic growth targets for next year.
The Politburo decided to 'maintain the continuity and stability of macroeconomic policies, and continue to implement the proactive fiscal policy and the appropriately loose monetary policy', according to a statement after the meeting.
Therefore, the mainland leadership is very unlikely to consider an exit from its pro-growth policy next year, and to continue to support the economic rebound as the top priority instead of shifting its attention to inflation and asset bubbles. To indicate its intention to tweak the stimulus measures more often, it said it would 'manage well' the intensity, pace and focus of the policy implementation.
The reasons for sticking to the pro-growth policy are strong. While the mainland's economic growth is expected to reach the target of 8 per cent for this year, Beijing is concerned that the economic rebound, mainly helped by the 4 trillion yuan (HK$4.5 trillion) economic stimulus package, is still fragile and its reading of the international economy is still very cautious. In addition, the policymakers are worried - as private investment continues to remain weak - that the stimulus package is still needed for job creation to maintain social stability.