China Should Keep Stimulus Through 2010, Adviser Says
Written on October 23, 2009
China’s government should keep fiscal stimulus spending intact for another year to allow for a “full recovery in 2011,” central bank adviser Fan Gang said.
Investment in China’s real estate sector is starting to resume and some industries are beginning to utilize previously idled capacity, Fan said. The government’s stimulus is needed to keep these trends intact and encourage private investment to revive industries that haven’t begun to recover, he said without identifying which industries are weakest.
A report yesterday showed China’s gross domestic product rose 8.9 percent in the third quarter from a year earlier, the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession.
“We need the government support for another year to allow China to have another year of 8 percent growth and lay down a foundation for China for a full recovery of the economy in 2011,” Fan said in an interview in Toronto, where he’s attending a Canada China Business Council event.
“When your multiplier effect is still not yet there, and you don’t have the private-sector investment to follow up to substitute the government investment, you will have a slowdown.”
China has countered an 11-month slide in exports by rolling out a $586 billion stimulus package.
The economic expansion the government reported yesterday exceeded the 7.9 percent gain in the previous three months and pushed stocks lower around the world on concern the central bank may tighten monetary policy. On the eve of the release, the cabinet signaled that inflation concerns will play a greater role in setting policy.
Filed in: money.