New stimulus targets economic upgrade
Mainland's lighter dose of investment spending focuses on economic reform and infrastructure improvements rather than just raw growth
In the centre of Nansha, an industrial hub of the Pearl River Delta, miles of paved roads are being pulled up to make way for the construction of a metro track, which will become an artery of a nationwide rail network.
The mainland is spending 700 billion yuan (HK$882.6 billion) annually on its railways as it aims not only to boost economic growth but create more convenient transport connections.
The spending illustrates Beijing's approach to nationwide macroeconomic policy, a relatively lighter dose of economic stimulus compared with the four trillion yuan spending spree the central government unleashed in 2008 shortly after the demise of Lehman Brothers.
"The objectives of the existing macroeconomic policies and those in 2008 are different," Mizuho chief economist Shen Jianguang said. "Last time, it was aimed at stimulating growth but this time it is more about improving the economic structure."
Shen pointed out that the mainland's gross domestic product growth rebounded to 10.4 per cent in 2010 from 9.2 per cent in 2009 and 9.6 per cent in 2008.
Economists and academics widely expect China to deliver 7 to 8.5 per cent GDP growth this year, compared with the central government's targeted 7.5 per cent growth and the International Monetary Fund's (IMF) forecast of a 7.75 per cent rise. The IMF anticipates growth will taper off to 7.7 per cent next year.
"China is preparing for a more solid economic foundation by 2020 to cushion the adverse impact of its demography," said Thomas Chan Man-hung, head of the China Business Centre at Hong Kong Polytechnic University, referring to the mainland's ageing population.