China 'to ensure govt stimulus works'

Mr Xu Shaoshi, at a news conference on the sidelines of the fourth session of the 12th National People's Congress in Beijing yesterday, gave assurances that China would weather the current slowdown.
Mr Xu Shaoshi, at a news conference on the sidelines of the fourth session of the 12th National People's Congress in Beijing yesterday, gave assurances that China would weather the current slowdown.PHOTO: BLOOMBERG

Past package blamed for current woes; top economic official dismisses fears of mass layoffs

China will work to ensure better returns for its increased government spending this year, after a massive stimulus package implemented in the past decade was blamed for some of the economic woes affecting the country today.

The pledge was made yesterday by China's top economic planner, Mr Xu Shaoshi, who also dismissed concerns about mass unemployment caused by restructuring, and said it was "impossible" that the economy will suffer a hard landing.

China is adopting a more proactive fiscal policy this year to boost flagging growth in the world's second-largest economy.

Premier Li Keqiang announced on Saturday that the country will have an expected deficit of 2.18 trillion yuan (S$460 billion) this year, an increase of 560 billion yuan from last year.

"We want to let investments play a better and more key role in the economy, to make up shortcomings and help with structural adjustment," noted Mr Xu, head of the National Development and Reform Commission.

"It is part of our policy tool kit."

He said that the government's investments will focus on projects in affordable housing, railways, technological innovation, environmental protection and poverty relief.

To improve the quality of its investments, Mr Xu added that the government has set out three-year plans for its investments, to monitor and project the long-term results of its fundings.

The assurances came as China's biggest economic worries now are partly caused by its 4 trillion yuan government stimulus introduced in 2008. While it propped up growth, the funds created asset bubbles, worsened its already serious overcapacity and created bad loans - problems that the authorities have now had to fix.

The government has made cutting overcapacity one of the main priorities for structural reform this year, with about 1.8 million people expected to be laid off in the coal and steel industries, sparking concerns about social unrest.

But Mr Xu dismissed the possibility of an unemployment wave similar to the one in the 1990s, the last time the country went through major industrial reform. He cited successful cuts that provincial governments have already made, such as those made to the steel industry in Hebei and the coal industry in Heilongjiang in the past two years.

"There have been no major problems or social unrest," he said.

He said the authorities had set up online platforms to match job seekers to companies, and was optimistic continued growth would enable China to absorb job losses in vulnerable sectors. He dismissed concerns the country was headed for a hard landing, though he acknowledged the uncertainty of the global economy.

"China will absolutely not experience a hard landing. These predictions... are destined to come to nothing. Please don't worry," he said.

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A version of this article appeared in the print edition of The Straits Times on March 07, 2016, with the headline 'China 'to ensure govt stimulus works''. Print Edition | Subscribe