Too Early to Say China Has Hit Bottom: Economist

杜拉格斯▲

Too Early to Say China Has Hit Bottom: Economist

It is still too early to say the Chinese economy has touched bottom, but the government is also in no urgent need to launch any new fiscal stimulus policies, a leading government economist told Reuters.

Zhang Xiaojing, director at the Institute of Economics, which is part of the Chinese Academy of Social Sciences (CASS), said that even with a recent rise in some economic indicators, more time was needed to see whether government stimulus to date would yield a strong enough response in terms of economic activity.

"There are positive signs, but negative signs are visible as well -- exports are falling, industrial production remains weak, and the property sector is sluggish," Zhang said late on Thursday.

Zhang's comments offer a counter-balance to optimism among many observers that the economy has already started to recover.
Ma Jiantang, head of the National Bureau of Statistics, said the improvement in the official purchasing managers' index (PMI) in March, back into expansionary territory for the first time since last September, showed the economy may have bottomed out.

Zhang noted that, even though he did not think it was certain the economy had bottomed, Beijing was in no rush to add to its 4 trillion yuan ($585 billion) stimulus package or take other measures such as cutting interest rates further.

"The economic figures for the first quarter will not look ugly," said Zhang. CASS is the top Chinese government think tank.

Premier Wen Jiabao said last month that Beijing would do whatever it takes, on top of the existing stimulus, to maintain growth at an acceptable pace.

Zhang said it was a strategy of "drawing the bow but not releasing the arrow," namely showing people what Beijing could do but not taking action yet.

He said China was better positioned than European and Latin American countries to roll out new measures "if needed", given its solid fiscal position.  In terms of interest rates, Zhang said falling prices in China had given the central bank leeway to cut rates further if it needed to.

The People's Bank of China has cut interest rates five times since mid-September 2008.