Opinion | China must resist the temptation of economic stimulus for quick relief
Hu Shuli says with calls growing to arrest the slowdown, policymakers must not lose sight of the more vital goal of long-term development
The Boao Forum, held every April after the end of China's annual legislative meetings, offers yet another window into the country's policy directions. In his opening speech last Friday, Premier Li Keqiang ruled out using stimulus measures to counter economic fluctuations, saying healthy, long-term development was more important for China.
This was the second time he has made the point. At the close of the National People's Congress session last month, he told reporters he was satisfied that the government had refrained from using stimulus measures to meet growth targets in 2013. "Why can't we do the same this year?" he asked then.
Since that time, weaknesses in the economy have been laid bare: we've seen the rising risk of trust product defaults, troubles in the steel and coal industries, and even a few isolated cases of bank runs.
True, the March data showed some improvement, but forecasts for first-quarter growth continue to hover at around 7.2 and 7.3 per cent, lower than the annual target. No wonder the cries for stimulus are growing louder.
Why, then, is the government standing firm?
We believe its decision is based on an accurate assessment of China's development needs and current fragilities. Despite years of talk about the need for economic restructuring, it has continued to rely on an unsustainable, investment-led model of growth. A change is long overdue.
Besides, 2014 isn't 2008, when the government rolled out the 4-trillion-yuan stimulus package (HK$4.5 trillion at exchange rates then). Today, the country's basic infrastructure has improved, particularly in the more developed regions. Local government debt has surged, and the overall debt-to-GDP ratio is too high.