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Friday, March 6, 2009

China sees signs economy might be recovering


China sees signs economic growth is recovering but is watching closely to determine whether it needs to expand its huge stimulus effort as global conditions worsen, top economic officials said Friday.

"We have seen some positive signs including recovery of export growth," Zhang Ping, the chairman of the country's planning body, the National Development and Reform Commission, said at a news conference. "It really depends on the changing situation to determine whether we need additional investment."

Zhang and central bank Gov. Zhou Xiaochuan said positive data showed Beijing's policies were working. Zhou repeated Premier Wen Jiabao's statement Thursday at the opening of the legislature that China can achieve 8 percent growth this year as Beijing steps up spending to create jobs and boost exports.

World markets fell Thursday after Wen failed to mention any expansion of the 4 trillion yuan ($586 billion) stimulus plan. Along with worries about the financial health of big U.S. banks and General Motors Corp., that sent the Dow Jones Industrial Average down more than 4 percent. Tokyo stocks were down 3.5 percent in Friday afternoon trade.

Analysts are divided on how quickly China can rebound from the slump that saw growth fall to 6.8 percent in the final quarter of last year from 13 percent in 2007.

Some point to rising bank lending and other indicators and say the decline is already bottoming out. Others expect growth this year to fall as low as 5.6 percent — the weakest in nearly two decades — and argue China cannot recover until its Western export markets revive.

Two surveys released this week showed China's manufacturing contracted in February for a fifth month but at a slower rate. Exports fell 17.5 percent in January from a year earlier.

Zhang said China expects to emerge from the crisis more competitive than before.

He said 580 billion yuan ($85 billion) of the stimulus will be spent helping companies improve technology and energy efficiency.

"We are not looking only at immediate difficulties and challenges but also considering how to provide a solid basis for future development," he said. "Having stood the test of this crisis, the quality and competitiveness of the Chinese economy will reach a new high."

Zhang's comments were the most detailed explanation yet of how Beijing plans to spend its stimulus. The package was announced in November but companies and investors have received little information, prompting complaints by China's public and warnings that secrecy would increase the potential for corruption and waste.

The government will spend 370 billion yuan ($54 billion) on roads, power supplies and other rural infrastructure; 1.5 trillion yuan ($219 billion) on highways and railways and 150 billion yuan ($22 billion) on education, health and cultural facilities such as museums, according to Zhang. Some 1 trillion yuan ($145 billion) will go into reconstruction efforts for last year's devastating earthquake.

The stimulus is meant to reduce reliance on exports by boosting domestic consumption.

Zhang said Beijing has assigned 24 teams of auditors to make sure no money is misused or wasted in a system where thousands of officials are punished every year for embezzlement, extortion and other abuses.

"We have not discovered that any money has been misused," Zhang said.


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