MercoPress. South Atlantic News Agency

China confirms stimulus and credit policies to prop economy

Premier Wen Jiabao said current policies must continue because China is at a critical stage of its recovery

Chinese top leaders reaffirmed on Tuesday the country’s stimulus program and easy credit policy following one of the worst monthly performances of the Shanghai and Shenzhen markets fearing recovery efforts could be loosing steam.

Premier Wen Jiabao following a meeting in Beijing with World Bank president Robert Zoellick said China would continue with the current stimulus policies since the world’s third largest economy is at a critical stage of its recovery. The Shanghai Composite Index was the world’s worst performer in August slumping 22% in August

“We will not change the orientation of our policy” said Wen. “We will continue to pursue proactive fiscal and moderately easing monetary policies”.

Vice-Premier Li Kegiang at the opening of an international Investment & Trade Expo in the northeast of the country sent the same message: China's macro-economic policy would remain “consistent” and “stable” to consolidate a strong foundation for economic recovery.

Although positive factors are accumulating and momentum apparently growing, “China's economy still faces many difficulties and challenges as the international financial crisis is still not over” underlined Li in the north-eastern city of Changchun, capital of Jilin Province, considered the rust belt of China.

Li said the government would continue to stimulate consumer spending, push forward economic restructuring and facilitate foreign investment to energize enterprises and maintain persistent and steady economic expansion.

The revitalization of northeast China “will play a key role in coordinating regional economic expansion and spurring domestic demand”.

Premier Wen added China would fully implement policies in response to the international financial crisis to achieve the goals of economic and social development. China's economy grew 7.1% in the first half of this year and 7.9% in the second quarter, reversing a declining trend in the previous seven quarters.

Zoellick on this third visit to Beijing as head of the World Bank said China's economic recovery “might be better than expected”.

Latest data from China’s Ministry of Commerce shows that in the first seven months of this year domestic demand has surged 15.2% year on year and investment 32.9%. It also anticipates Chinese exports will begin to slow their decline or even grow on a monthly basis.

“The macro-economic policy and stimulus measures that China adopted in response to the international financial crisis have proven prompt, forceful, effective and realistic,” Wen said.

Wen said the world economy was now showing signs of stabilizing, but an all-round recovery would be a slow, difficult and complicated process, requiring long-term, concerted efforts by every country, “reinforcing dialogue, coordinating policies and deepening cooperation”.

The Chinese Prime Minister said imbalances in the global economy were rooted in “development disparities” and urged the international community to pay special attention to difficulties faced by developing countries, especially the least developed ones.

He said the gap should be lessened by “increasing aid, writing off debts, opening markets and technology transfer”. Wen added China was ready to strengthen cooperation with the World Bank and make new contributions to achieving the UN Millennium Goals and sustainable development.