Beijing rules out strong stimulus despite trade decline

Beijing maintains emphasis on structural reforms and urbanisation to drive growth after a decline in exports and imports for March

PUBLISHED : Thursday, 10 April, 2014, 11:20am
UPDATED : Friday, 11 April, 2014, 4:27am

Premier Li Keqiang has again ruled out strong stimulus to spur economic growth after the mainland posted worse-than-expected trade data, saying new momentum would be created through structural reforms.

Speaking to an international audience at the Boao Forum yesterday, Li reiterated there were "downside risks" in the economy. But he said: "We won't adopt short-term strong stimulus policies just because of temporary fluctuations in the economy. Instead, we will put more emphasis on promoting healthy development.

"The guidelines we have determined and the policy reserves we have will enable us to cope with all kinds of potential risks and challenges … We are able to and have confidence in keeping the economic operation in a reasonable range."

He reiterated remarks from last month that the central government's 7.5 per cent growth target for the economy this year would be flexible as long as enough jobs were created.

Mainland customs authorities reported yesterday that exports unexpectedly fell 6.6 per cent year on year last month, though narrowing from a sharp contraction of about 18 per cent in February. Imports declined 11.3 per cent, after rising 10.1 per cent in the previous month, partly due to falling commodities prices.

Analysts say Li's remarks indicate that Beijing is not overly worried about a slowdown, although more fine-tuning policies could be introduced in the event of a sharp slide.

"His speech was mainly aimed at bolstering confidence. Beijing may have set a bottom line for growth, which could be slightly lower than the official target," UBS Securities economist Wang Tao said. "The economic situation may not be bad enough to trigger any immediate bailout from the government."

The mainland's first-quarter gross domestic product figures will be released next Wednesday. Weak data so far has prompted the World Bank to trim its forecast for the mainland's GDP growth this year to 7.6 per cent, down from an earlier projection of 7.7 per cent.

The central government recently expanded tax cuts to more small businesses and said it planned to boost investment in railways and low-cost housing.

Similar "mini-stimulus" measures were taken last year to boost demand, helping the economy grow 7.7 per cent.

Li said new growth momentum would come from reforms as Beijing sought to ease market access and trim government intervention in the market; from urbanisation and industrial upgrading; and from job-supporting policies to improve people's livelihoods. He also pledged to build closer links between the mainland's and Hong Kong's stock markets.

Customs spokesman Zheng Yuesheng said the first-quarter trade decline was temporary and had been exacerbated by a strong comparison base last year. The mainland launched a crackdown in May last year after exporters were accused of inflating the value of exports to evade currency controls. "Exports and imports will likely resume growth from May and enter a relatively steady and moderate growth period," he said.

Australia & New Zealand Banking said trade had actually improved when the distortion from over-invoicing last year was excluded, noting that port throughput told a different story, with container exports starting to pick up from the fourth quarter of last year.

Trade with Hong Kong slumped 33.3 per cent year on year in the first quarter.