Policy Modifications Won't Hinder Growth

飞雪寒冰

China has to fine-tune its economic policies, but it will avoid changes that might hinder growth, a researcher at the Ministry of Finance told Caijing.

Liu Shangxi, deputy dean of the ministry's Research Institute for Fiscal Science, declined to specify when the proactive fiscal policy and moderately loose monetary policy might be adjusted. However, he said, the country will avoid changes that could hold back growth in the second half.

His comment is in line with a resolution on July 23 by the top decision-making body of the ruling Communist Party of China.

飞雪寒冰

Expanding domestic consumption and stabilizing exports will top the government's work agenda for the rest of 2009, the Political Bureau said in a statement on the central government Web site (www.gov.cn).

Economic growth is imbalanced, with investment contributing 6.2 percentage points of the first-half gross domestic product growth of 7.1 percent. Consumption accounted for 3.8 percentage points, while a decline in the trade surplus shaved 2.9 percentage points off the growth rate, according to the National Bureau of Statistics.

Liu said the government should consider how to boost consumption instead of focusing on investment. China should set specific targets and schedules for increasing the ratio of consumption to GDP, Liu said, without elaborating.

A professor at the Party School of the CPC Central Committee, Zhou Tianyong, said substantial hikes in fees would constrain some small and medium-sized enterprises.

Fiscal revenue totaled 3.4 trillion yuan in the first half, down 2.4 percent year-on-year. But tax revenue was down 6 percent to 2.95 trillion yuan, while non-tax revenue – which includes fees – soared 31.4 percent to 444.5 billion yuan, according to the Ministry of Finance.

飞雪寒冰

Zhou told Caijing that tighter credit was likely to slow GDP growth in the second half, because most first-half investment was supported by bank loans.

On July 14, the central bank made an unusual decision to make compulsory bill issues of 100 billion yuan to selected banks to curb loan growth.

Some analysts took that move as a sign that China intended to tighten monetary policy, while others saw it as a penalty on certain banks whose loan growth was regarded as excessive.

Banks made 7.37 trillion yuan in new loans in the first half. In June alone, new lending totaled 1.53 trillion yuan.