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China opts for a moderate recovery

China certainly needs investment to boost economic growth, it has taken and intends to take a series of measures to support key sectors of its economy, such as automobiles and steel, but Beijing should not take a second massive fiscal stimulus plan, according to comments from influential economists on Wednesday.

Early in the week, an official of the National Development and Reform Commission (NDRC) had already said a fiscal stimulus of the same magnitude as implemented during the 2007-2009 financial crisis is unlikely to happen.

An article published on the website of the Xinhua News Agency is also warning that Beijing has no intention to repeat the plan of 4000 billion yuan set up in 2008.

“The Chinese government’s intentions are very clear: it will not present another massive stimulus package to stimulate economic growth,” writes Xinhua. “Policies to support the growth will not resume the methods used three years ago.”

Beijing is trying to offset the effect of some 10,700 billion yuan of local government debt that resulted from the stimulus plan, which is also accused of having fueled inflationary pressures and real estate speculation.

Wednesday in the official press, experts point out that excessive investment could affect the quality of economic growth and exacerbate overcapacity in some sectors.

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