China’s recovery is still not “solid and balanced”, the country’s finance minister warned today, as he pledged to keep in place the key elements of its stimulus package.
Writing exclusively in Emerging Markets, Xie Xuren said China’s proactive fiscal policy had helped the economy continue to post strong rates of growth in the face of a sharp contraction in demand for its exports.
“China’s macroeconomic policy and stimulus package for coping with the international financial crisis are effective,” he said. “China’s economic growth is contributing to the recovery of the world economy.”
But Xie acknowledged that the world economy still lacked a “firm foundation” for a solid recovery. “With many uncertainties ahead, the process towards all-round recovery will be slow and tortuous.”
The recovery and stabilisation of the Chinese economy was “not yet steady, solid and balanced,” Xie said, adding that China would keep in place its proactive fiscal policy and relatively low interest rates.
The Chinese stimulus package included a RMB (renminbi) 4 trillion two-year investment plan, tax cuts, higher subsidy payments for low-income groups, and payouts to farmers and rural workers worth RMB716 billion.
Looking ahead, Xie said the government would prevent any sudden spike in inflation while continuing to find long-term solutions to “structural problems” that were slowing the “sound development” of the economy.
His comments followed briefings by senior Chinese officials on the fringes of the G20 summit in Pittsburgh last month, in which they gave commitments to keep stimulus measures in place.
Ma Xin, director general for international cooperation at the National Development and Reform Commission, said that the world economy was unbalanced and there were problems with the economic models in both the US and China.
“One of the problems is US growth based on high consumption and low savings, and the Chinese model of low consumption and high savings. It is a manifestation of the imbalances in the world economy.”
In his Emerging Markets article, Xie urged the international community to make “concerted efforts to boost economic growth” while actively promoting “balanced development” internationally, without specifying which countries needed to enact major policy reforms.
But speaking in Pittsburgh last week, Zheng Xiaosong, director of international affairs at the finance ministry, added there needed to be a wider rebalancing between the developed and developing halves of the world.
“You can’t expect a few developing countries to fill in the gap in domestic demand left by developed countries,” he said. “I think that developed countries should undertake greater responsibility for making the world economy balanced and they should step up financial and technical support for developing countries.”
See Xie Xuren’s article: http://www.emergingmarkets.org/article.asp?ArticleID=2309128&CategoryID=190