China’s economic policy makers are becoming more and more convinced that the country’s current economic situation is direr than had been expected and may not bottom out until well into 2009. As a result, new economic stimulus measures are being formulated and will be launched in the following months.
Zhang Ping, Director of China’s economic policy maker, the National Development and Reform Commission, said yesterday that in response to the seriousness of the situation, the government would release more policies in the next two years to further expand internal
According to Fan Gang, an economist and member of the Monetary Policy Commission of the People’s Bank of China, economic stimulation policies should include interest rate cuts and a lower deposit reserve ratio since liquidity is shrinking and banks are reluctant to lend. To maintain stable export growth, the government should restore the export tax rebate to 17%. "This is the biggest financial policy I hope to see and may be able to see," Fan said. Since it is not realistic to adjust the exchange rate without triggering trade wars, tax rebates are popular in the world. Fan Gang also suggests the government stimulate the real estate market. "The rough decision has been made, and detailed measures, such as permission to ease real estate financing, will be formulated latter."
"Now that economic stimulation policies have been launched, fiscal policies are very supportive and may be effective in the second half of 2009 and 2010, " said Li Daokui, director of the Center for China in the World Economy, Tsing Hua University, "but these measures may not be immediately effective."
   　　
Li believes that in order to restore confidence, the government should focus on the real estate and automobile industries and the stock market.
Zhang Ping described the impact of the current international environment on the Chinese economy in five aspects: quite rapid fall in import, export, and investment growth; slowdown in industrial production, and decline in raw material prices and transportation market demand; depressed real estate and automobile markets; operational difficulties for some enterprises, along with a severe employment situation; and, a gradual fallback of fiscal income growth and widening risks for financial markets.