Tue, Mar 25, 2014 - Page 15 News List

No need for new stimulus in China, ADB head says

Reuters, BEIJING

China’s economy may still grow about 7.5 percent this year, despite signs of a slowdown, and there is no immediate need for the Chinese government to roll out fresh stimulus measures, Asian Development Bank (ADB) president Takehiko Nakao said yesterday.

Nakao, former Japanese vice minister of Finance for International Affairs, told reporters that he expects China’s economic growth to be still roughly in line with the Chinese government’s target.

ADB is revising its forecast on China’s growth for this year, currently at 7.5 percent, he said, but did not elaborate.

Chinese leaders face a challenge to keep the economy on an even keel, while forging ahead with a long list of market-based reforms announced at a key party meeting late last year, Nakao said.

He said that some short-term stimulus might be needed to smooth out ups and downs in the economy, but there was no immediate need as growth remains healthy due to the country’s ongoing urbanization and rising consumption.

“At this moment, I don’t think China needs to resort to a stimulus package,” he said.

“Our judgement of China’s economic growth is that it will continue to grow at the rate of around 7.5 percent.”

Concerns about the health of the Chinese economy are mounting after a string of data showed growth is faltering, raising doubt over the fulfillment of Beijing’s growth target in the absence of fresh stimulus measures.

The Asian bank president said he was impressed by Chinese leaders’ commitment to market-oriented reforms to help put the economy on a more sustainable footing, but they needed time to implement them.

Liberalizing interest rates and the currency regime in China should “go hand in hand,” and interest rate liberalization could be carried out in a step-by-step manner to ward off possible banking risks, he said.

He said Asian economies were more prepared to cope with any economic turbulence and the region’s fundamentals were much stronger than they were during the Asian financial crisis in the late 1990s.

“They are more prepared to take action quickly if there are signs of instability,” Nakao said. “Fragility? I don’t buy that idea. Of course, we cannot be complacent, we should always be prepared.”

Japan’s monetary policy easing, which has supported the economy and boosted the country’s foreign direct investment flows to the rest of the Asian region, could help offset any impact from the withdrawal of the US Federal Reserve monetary stimulus, Nakao said.

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