China signals more stimulus as economic slowdown deepens

16 January, 2019 12:00 AM printer

BEIJING: China on Tuesday signaled more stimulus measures in the near term as a tariff war with the United States took a heavy toll on its trade sector and raised the risk of a sharper economic slowdown.

The world's second-largest economy will aim to achieve "a good start" in the first quarter, the National Development and Reform Commission (NDRC) said in a statement, indicating the government is ready to counter rising pressure on growth, report agencies.

Surprising contractions in China's December trade and factory activity have stirred speculation over whether Beijing needs to switch to more forceful stimulus measures, though most analysts believe the government will avoid doing so due to worries it could heighten debt risks and weaken the yuan.

"Further economic stimulus measures will be needed. The authorities seem to be taking their time to deliver this, perhaps chastened by the overkill of their stimulus in the financial crisis," ING economists said in a note to client.

"The eventual package may be very substantial."

Some analysts believe China could deliver 2 trillion yuan (US$296.21 billion) worth of cuts in taxes and fees, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects. Most, however, expect the fresh stimulus will take months to start feeding into the economy.

China's growth slowed in 2018 as a years-long campaign to reduce a mountain of debt and a crackdown on riskier lending practices hurt domestic demand. As the trade war with the United States escalated last year and hit exports, global financial markets went into a tailspin on worries about a sharper China slowdown though many analysts believe an economic hard-landing is unlikely.

Premier Li Keqiang said China achieved its key 2018 economic targets, which were "hard-won", and seeks a strong start to the economy in the first quarter to establish conditions helpful to meeting this year's goals, according to state television on Monday.

Sources told Reuters last week that Beijing was planning to lower its growth target to 6 to 6.5 per cent this year after an expected 6.6 percent in 2018, the slowest pace in 28 years.

The proposed target, to be unveiled at the annual parliamentary session in March, was endorsed by top leaders at the annual closed-door Central Economic Work Conference in mid-December, the sources told Reuters.


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