Analysts, entrepreneurs defend previous govt stimulus plan

16 january 2013

BEIJING — Analysts and business leaders have defended China’s four-trillion-yuan (about $639 billion) stimulus plan that was implemented four years ago.

Their backing came amid concerns that the massive spending program is partially responsible for downward pressure in the current economy.

“The stimulus package helped us to weather external economic shocks,” a report in the Monday edition of the First Financial Daily quoted Jia Kang, director of the Research Institute for Fiscal Science under the Ministry of Finance, as saying at a forum held in east China’s city of Qingdao.

In 2008, China vowed to spend four trillion yuan over the course of two years to boost growth and domestic demand, as well as to cope with the global financial crisis.

Jia said the plan had a reasonable structure, including 1.5 trillion yuan targeting problems with long-term development, and another 1.5 trillion spent on building infrastructure. The rest was spent on rebuilding a quake zone in south China’s Sichuan province and aspects concerning people’s livelihoods.

The government should deepen reforms with greater determination in response to problems that have arisen in the last two years, such as energy consumption, the coal and electricity pricing mechanism and monopolies in the power industry, according to Jia.

Simon Cox, Asian economics editor at the Economist, said the stimulus package starting 2008 has kept unemployment low and therefore avoided wasting resources and investment.

The Chinese government now hopes to balance the economy, said Cox, adding that the strategy may slow short-term growth but will be more fruitful in the long run.

Yan Xuan, president of Nielsen Greater China, said the government’s efforts regarding urbanization and policies to boost domestic demand have taken effect.

Yan said Chinese consumers, especially those in first-tier cities and rural areas, are still some of the most confident consumers in the world, according to company surveys conducted in the first two quarters this year.

As for China’s current economic structure and future growth, many analysts and entrepreneurs said they are optimistic about its medium- and long-term development and expect upgrades in the financial system, income distribution system and more business innovation.

Premier Wen Jiabao said at the Summer Davos forum held in September that the stimulus plan not only facilitated the country’s swift economic upturn, but also promoted the recovery of the world economy.