The change of fiscal & monetary policies highlights the Chinese government's res

The change of fiscal & monetary policies highlights the Chinese government's resolution to maintain economic growth

 

2008-12-03 10:53                                                 Source: Xinhua net

Category: Policy

 

The Executive Meeting of the State Council held by the Prime Minister Wen Jiabao ascertained the 10 measures to be taken, which are purposed to further expand domestic demands and promote economic growth. The implementation of these measures would be invested with RMB 4 trillion Yuan by the end of 2010.

Under the context that the primary economies in the world are regulating respective fiscal and monetary policies one after another, the implementation of this policy made by the Chinese government is in conformity with the market anticipation. Nonetheless, this adjustment would still arouse wide concerns and bring about positive influence on the markets.

Since this year, the global financial crisis ignited by the subprime mortgage crisis of the U.S.A has been evolving more and more severely, and has imposed a strong impact on entity economy in the world. Although China is less subjected to the direct impact thereof, the negative effect on the economic growth has been gradually come out. China's economic growth has been let down for the successive five quarters, specifically, the GDP growth of this year has dropped from 10.6% in the 1^st quarter to 9% in the 3^rd quarter.

Under the influence of financial crisis and letdown of the global economy, the growth rate of China's export has fallen 4.8 percentage points in the previous three quarters, and the stimulating effect of net export has dropped 1.2 percentage points as compared with the same period of last year. As we all know, the combination of export investment and consumption is the primary force to impel the growth of the China’s economy.

In the mid of this year, the Central Government set the primary task of the macroeconomic control for the second half year as maintaining stable and fast economic development while making price control. Up to now, the target of holding the line of increasing price rise has been basically achieved; CPI has been falling for the successive five months and is estimated to continue decreasing. Therefore, to impel stable and fast economic growth shall be taken as a top priority at present.

Overall, the fundamental plane of the China’s economy, namely, price level, employment, international balance of payments and financial system are in good conditions. Thus, the Chinese government is provided with valuable space to implement positive fiscal policies and moderately loose monetary policies.

In fact, since flexible and cautious macroeconomic control policies were carried out during the midyear, a host of measures under the frame of new policies have been put into practice, such as increase the rate of tax reimbursement for export, cut interest rate and the rate of reserve against deposit, support sound development of real estate and approve new key infrastructure projects, etc.

During the past three decades from China's Reform and Opening up, China has smoothly weathered through several great economic fluctuations via positively employing the means of macroeconomic control. So, the Chinese government is in the full conviction to properly tackle the current economic situations. The Prime Minister Wen Jiabao expounded the reasons for such confidence on many significant occasions for many times.

Under the frame of new policies, China would achieve the economic targets by stabilizing exports and stimulating domestic demands. The improvement in external demands might require some time, but domestic demands could be considerably developed. Also, favorable balance of financial revenue and expenditure would positively back up the expansion of infrastructure construction. In addition, a new round of policies on rural reform would enhance the demands for consumption in the rural areas, which might bring about a strong driving force therefor.

In view of the new measures, the Chinese government is looking upon the current economic and financial situations as an once-in-a-lifetime opportunity for reorganization and in-depth reforms. Most of the ten measures are concerned about less developed regions or low income people; meanwhile, ecological environment, energy saving and exhaust reduction are especially mentioned.

At this conference, the investment expansion is required with "faster and weighty actions, pertinent and pragmatic measures". Such wording could not only reflect the urgency to implement economic stimulating measures, but feel a well-thought-out plan on the new fiscal and monetary policies the Chinese government would carry out.

As pointed out by some economists, the Chinese government only took half a year to regulate the CPI from 8% and above to 5% and below. So, when more positive and loose fiscal and monetary measures are successively carried out, contradiction and problems that impact the current economic growth would be gradually solved, thus the China’s economy could still be developed in a smooth and rapid way.

(The substation which released the first issuance: http://huaibei.mofcom.gov.cn)