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China academics advise against aggressive stimulus
May 30, 2012 / 2:57 AM / 5 years ago

China academics advise against aggressive stimulus

BEIJING, May 30 (Reuters) - China needs an appropriate amount of investment to spur economic growth but Beijing should not launch a new round of aggressive fiscal stimulus, influential academics said in remarks published in leading state-backed newspapers on Wednesday.

They followed comments earlier this week from an official of the state planner, the National Development and Reform Commission (NDRC), who said a large scale economic stimulus package of the sort unveiled during the global financial crisis was unlikely.

The top government researchers and economists warned that excessive investment would reduce the efficiency of economic growth and exacerbate over capacity in some industries.

“It is not necessary for China to launch another massive 4 trillion yuan stimulus plan. We must hold off any impulse of making excessive investment,” said Liu Yuanchun, a professor at the Renmin University, according to the official People’s Daily, the mouthpiece newspaper of the ruling Communist Party.

Chen Bingcai, a professor at the National Academy of Governance, said China must not overly expand investment and sacrifice quality growth for high growth. Chen’s school teaches and trains many senior leaders of the central government.

“If Beijing returns to an investment boom again, the previous call of adjusting the economic structure would turn out to be nothing but empty talk,” the official China Securities Journal citing Chen as saying.

China’s economy is on course this year to grow 8.2 percent, its slowest pace since 1999, according to the consensus forecast of investment bank economists in the latest benchmark Reuters poll.

Beijing has unveiled an array of measures recently to boost domestic consumption and private investment to try to cushion the economy from the headwinds of a slowdown in export demand growth.

Such moves include fast tracking approval of infrastructure investment, offering subsidies for buying energy-saving home appliances, encouraging more private capital to enter a handful of sectors, which are dominated by state firms. [ ID :nL4E8GT3QX]

The NDRC, China’s top economic planning agency, gave the green light to around 100 projects on May 21, fanning speculation that Beijing may initiate a new fiscal spending spree.


Global financial markets have been caught in a frenzy of speculation on the subject, which lingered on Wednesday.

Local media reports in China began the day on Tuesday citing unconfirmed talk that Beijing was readying fresh stimulus. By the end of the trading day in China the tone had reversed.

Media began citing a microblog reference to a news briefing, purported to have been held by the NDRC, denying that a stimulus package like the 4 trillion yuan ($635 billion) plan during the global financial crisis was in the pipeline.

The original Twitter-like microblog entry, reported by local media to have been on the official Xinhua microblog, could not be found when checked by Reuters. There was no mention of it on the Xinhua newswire or its public website.

The NDRC website carried no reference to the report, or a news conference and declined to comment when contacted by Reuters.

The later Chinese media reports cited the NRDC as saying there had been a misinterpretation of the May 21 announcements and that the project approvals had nothing to do with efforts to stabilise economic growth.

China’s main news portal,, also cited a document from the NDRC branch in central Hunan province as saying that China would not roll out huge investment, as seen in the previous stimulus package, and Beijing would not relax property tightening policies, blamed by many for slowing domestic activity.

Luo Guosan, deputy director of the investment office at the NDRC, had said earlier in the week that there was little chance of Beijing unveiling another big spending plan to pump-prime the economy.

“We want to target and maintain a reasonable level of investment in society to stabilise economic growth. To think about having another large-scale government-led investment spurt to stimulate economic growth, that is unlikely because it is not sustainable,” Luo was quoted as saying in the Chongqing Commercial Daily on Monday.

China’s mammoth 4 trillion yuan stimulus package to counter the 2008-09 global financial crisis fuelled speculation in the real estate sector and left a mountain of local government debt.

“We should pay attention to the investment growth pace, as the previous 4 trillion yuan stimulus plan has left us with many uncompleted projects. If we start new projects again, we may finally fail to wean the economy from investment,” Bai Chongen, a professor at the Tsinghua University, was quoted as saying by the People’s Daily. (Reporting by Aileen Wang and Nick Edwards)

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