China may spend to beat global slump

Strong domestic demand and foreign investment have helped insulate China from a global slump

In this story: Outperforming China Stable currency RELATED STORIES, SITES

HONOLULU, Hawaii -- China has said it is ready to boost government spending to support the country's economic growth amid a global slowdown.

Chinese Finance Minister Xiang Huaicheng said at an Asian Development Bank meeting in Hawaii the government is keeping an eye on the global economy and would adopt the "appropriate macroeconomic policy" and "boost domestic demand" if necessary.

China's growth is projected to run close to 7 percent each year for the next four years.

China's economy grew 8.1 percent in the past quarter, a slight acceleration from the 8 percent growth recorded in 2000, despite the slowdown in global growth.

The first quarter was stronger than many forecasters, including the ADB, had anticipated and a number have revised full-year growth forecasts higher as a result.

Strong domestic consumption, fixed-asset investment and foreign direct investment are shielding China from the impact of the slowdown in the United States, analysts have said.

Outperforming China

The ADB had forecast full-year growth of 7.3 percent for China, against an average forecast for Asia of 5.3 percent, but has said China could outperform by an even wider margin.

"In the near term, we will continue to carry out a pro- active fiscal policy together with a prudent monetary policy and increase capital investment through various channels," said Xiang.

Xiang told ADB delegates social stability was key to maintaining Asia's historically high growth rates and said China's own commitment to "accelerate economic growth" was rooted in a determination to reduce poverty there.

Per capita income in China is below $1,000 per year, according to an estimate by Standard & Poor's rating agency, compared with income of more than $30,000 in Hong Kong.

Stable currency

China's policy of maintaining a stable exchange rate for the renminbi accompanied by fiscal stimulus combined to shield the economy from the impact of the Asian currency crisis in 1997-98, Xiang said.

"These measures effectively restrained the deflationary trend and brought about a significant turnaround," he said.

"The economy has embarked on a road of benign development propelled by both investment and consumption."

Reuters contributed to this report.

ADB sees dip in growth for Asia
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Asian Development Bank

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