Don't hold your breath for stimulus, state media says

Growth-challenged China is unlikely to launch massive stimulus measures like the four trillion yuan (HK$4.54 trillion) package three years ago, Xinhua said yesterday.

The official news agency effectively poured cold water on forecasts by two brokerages that stimulus measures worth trillions of yuan were imminent.

In a story aiming to interpret Premier Wen Jiabao's repeated comments last week about 'maintaining stable economic growth', Xinhua said the 2009 stimulus package was designed to 'protect growth' and that 'the nation would not return to the old road'.

It said spending on the scale of 2009 would risk flirting with consumer price inflation, inefficient investments and asset bubbles.

After Wen made his remarks during a trip to Hubei and in a State Council meeting in the past week, China International Capital Corporation forecast that 600 billion yuan in government investments were in the pipeline.

Another brokerage, Credit Suisse, expected one trillion to two trillion yuan in investment programmes to be led by the central government, in contrast to the stimulus package in 2009, which was driven by local governments and left them with big debts that still burden them.

Xinhua said the central government 'would not fork out as much money as last time to stabilise growth', because it was unsustainable to do so.

Most economists expect the central government to step up fiscal measures, such as approving more infrastructure investments, and to ease monetary controls, such as by reducing the reserve that banks must set aside when lending, to meet its 7.5 per cent economic growth target this year.

'The current economic slowdown bears no comparison to the one in 2008,' Bank of America Merrill Lynch economist Lu Ting said yesterday. 'Markets should not turn overly bullish speculating on a big stimulus package but should equally avoid being too bearish on [China's] short-term weakness.'

Last month, mainland economic indicators such as trade, industrial production and new lending were far lower than economists had expected.

Last week, the World Bank lowered its gross domestic product forecast for China for this year by 0.2 percentage points to 8.2 per cent and called for stimulus measures.

UBS economist Wang Tao expects the state planning agency to approve more infrastructure projects in the coming months.

1.5tr

The amount of the mainland's 2009 stimulus package that was earmarked for infrastructure improvement projects