Gloomy clouds of falling exports aside, Chinese premier Wen Jiabao is confident the country can meet its growth targets this year and called on the world to pull together to find a way out of economic crisis.
“The international financial crisis has entered its fifth year, yet its underlying impact is still with us,” Mr. Wen told the opening day of the World Economic Forum in Tianjin, known informally as the summer Davos. “It is all the more important for us to stick together to meet the difficulties head-on.”
GDP growth was at 7.8 per cent after the first half of this year but China has seen exports and imports drop off along with industrial production, leading many economists to revise this year’s predictions downward.
Mr. Wen again promised “proactive fiscal policy and prudent monetary policy,” suggesting more spending is in the pipeline. Late last week the National Research and Development Commission was reported to have approved new infrastructure projects totaling nearly one trillion yuan ($158.7-billion U.S.) over the next several years; though much of the spending had already been announced, it was a signal that the central government has taken China’s slowing growth seriously.
“We are fully confident we have the conditions and the abilities to overcome the challenges ahead,” he said.
There were few offerings for other world leaders; Mr. Wen made it clear China has its own challenges to manage. But he also offered a reflection on his own legacy as leader, in one of his last major speeches as premier before a power transition begins later this fall, praising what he called the fastest-growing decade in the history of “New China” which has cut China’s population living in poverty by half.
“Hundreds of millions of Chinese farmers and the towns and villages where they live and work experienced tremendous change in the past 10 years,” he said.
Earlier in the day, the IMF’s deputy managing director, Zhu Min, told the forum the euro zone crisis still has “some way to go” before recovery, and will draw Asian exports down with it.
“We should not underestimate the negative impact from the European crisis to the whole world. This is very important,” Mr. Zhu said. “When the growth in the euro area drops to zero, you will see export growth from this region drop to zero too. This is very important.”
The forum opens after a weekend of difficult economic data in China; the consumer price index has crept up again to 2 per cent, exports crept up just 2.7 per cent and imports unexpectedly dropped 2.6 per cent, all signaling that China’s slowdown is still bottoming out.
Higher bank lending numbers for August were met with sighs of relief in some quarters, however, suggesting some strengthening is now in sight. Net bank lending was at 704 billion yuan ($111.75-billion U.S.) in August, up from 540 billion in July. “This should relieve some fears that policy makers’ efforts to stimulate the economy are no longer effective,” wrote Brian Williams and Qinwei Wang at Capital Economics. “But any optimism should be tempered by the fact that borrowing by firms, as opposed to households, remains weak.”