China Economy

Mainland sticks to stable growth

First politburo meeting under Xi Jinping does not hold out hope for a big stimulus package but promises fine-tuning of economic policies

PUBLISHED : Wednesday, 05 December, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:00pm

The new central leadership yesterday hinted that economic stability and continuity would be its priority, dashing hopes for a big-bang stimulus for the time being.

A statement released after the first Politburo meeting warned that the domestic economy is still facing challenges amid the global slowdown and the government would continue to strengthen macro policies and adjust the growth model.

Growth slowed to a 14-quarter low of 7.4 per cent in the third quarter, but economists broadly expect China to meet its full-year target of 7.5 per cent growth this year, with some quarters even expecting 8 per cent.

Yi Xianrong, a researcher at the institute of Finance and Banking at the Chinese Academy of Social Sciences, said he does not expect radical changes in the economic policy if the top priority of the new administration is maintaining stable growth.

"A large stimulus package is also unlikely," he said, adding the country will be able to maintain the current growth pace next year.

While the Politburo meeting, chaired by new party chief Xi Jinping, did not depart from the general direction of the current policy, the statement, however, said: "We will fine-tune macroeconomic policies and launch pre-emptive measures at the appropriate time."

Some experts believe the economy may be bottoming.

The HSBC Purchasing Managers' Index rose to 50.5 in November, from 49.5 in October, in the first expansion in 13 months.

A reading above 50 indicates expansion while one below it shows contraction.

Domestic consumption and infrastructure investment will be the driving forces.

The statement said the government would focus on improving income levels and boost domestic consumption.

Even though the economy has weakened and prices have softened somewhat, the government is still wary of inflation. "We will maintain consumer price stability," the statement said.

Inflation dipped to a 33-month low of 1.7 per cent last month.

Yi of the Chinese Academy of Social Sciences said a cut in interest rates or the reserve requirement ratio to inject more liquidity into the market is also unlikely.

Concern over a rebound in inflation and property prices may discourage the central bank from cutting interest rates further though it may still adopt tools to adjust liquidity in the banking system, analysts said.

The statement said the government will strengthen property market curbs and secure housing supply in an effort to improve income levels, adding that the urbanisation process will be carried out "step by step".

It also pledged support for agriculture and also said the government will boost imports and improve its export policies.