State-run Xinhua News Agency announced Tuesday that China will not introduce a large stimulus similar to the one it implemented during the 2008 financial crisis, tempering expectations following a call last week by Premier Wen Jiabao to prioritize economic growth. From Bloomberg:
“The Chinese government’s intention is very clear: it will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said in the seventh paragraph of a Chinese- language article on economic policy. “The current efforts for stabilizing growth will not repeat the old way of three years ago.”
Premier Wen Jiabao’s call last week to focus more on boosting economic growth has spurred speculation the nation will step up measures to boost expansion that’s set to slow for a sixth straight quarter. Economists at Credit Suisse Group AG and Standard Chartered Plc said yesterday that stimulus is likely to be smaller than the 4 trillion yuan ($630 billion at today’s exchange rate) package announced in 2008.
Credit Suisse economists said spending on investment will probably range from 1 trillion yuan to 2 trillion yuan. Standard Chartered said China is starting a “mini-me” version of the prior stimulus.
Smaller stimulus doesn’t mean no stimulus, however, and the government has already made policy announcements this week aimed at promoting growth. The State Council has agreed to revive a “cash for clunkers” program that gives consumers financial incentive to trade in their cars, and the Ministry of Finance announced that it will offer subsidies ranging from 100 to 400 yuan on energy-efficient televisions and air conditioners sold beginning June 1.
The Wall Street Journal reported today that Asian stock markets have rallied on hopes of a China stimulus.
