Source: China Daily
Premier Wen Jiabao called for greater efforts to support growth, through more monetary fine-tuning and fiscal incentives, amid signs of the economy further cooling.
While economic growth is still on track, development will face more complex domestic and global hurdles, Wen said during a weekend inspection tour to Wuhan, capital of Central China’s Hubei province.
Wen’s comments came as a series of lower-than-expected economic indicators showed that the economy is facing further downside risks.
Domestic industrial output for April was at its lowest level in nearly two years while retail sales were also the weakest in 14 months, according to the National Bureau of Statistics.
Exports rose by 4.9 per cent in April, barely half the rate which economists had forecast, while imports fell far short of expectations. In addition, foreign direct investment slid lower in the first four months of 2012.
To make matters worse, fixed asset investment growth reported its slowest pace in a decade.
“The relationship between maintaining growth, adjusting economic structures and managing inflation, must be properly handled,” Wen said in comments reported by Xinhua News Agency. “We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth.”
The government, he said, will continue to carry out anticipatory adjustments and fine-tuning, boost domestic consumption and promote steady and relatively fast economic growth.
Wen visited several local enterprises during his visit and exchanged views with company representatives.
“The premier’s words came at a vital time, and have sent a strong signal of further policy easing,” said Lu Zhengwei, chief economist with the Industrial Bank.
“However, apart from domestic policy adjustments, the most severe downside risk for the economy was from external demand,” Wang Tao, chief China economist with UBS AG, wrote in a research note.
“The policy easing may lead to a bounce back in business activities in the economy, accompanied with further retreating inflation, which is bullish for the stock market … but the worsening debt crisis in Europe is adding more pressure to the market in the short term,” Wang said.
If the global economy hits a sudden setback, it will result in Chinese GDP falling to 7 per cent in 2012, Wang predicted.
Some companies Wen visited are facing difficult business conditions due to weakening demand in developed economies and rising costs at home.
Liu Cunyuan, general manager of Wuhan Haier Electronics, said home appliance sales fell by about 13 per cent year-on-year during the first quarter of 2012, as the subsidy programme ended.