Mini-stimulus to spur growth

Provinces take targeted measures to support economy

Several Chinese provinces including Northeast China's Heilongjiang recently unveiled a series of "mini-stimulus" measures to shore up their economic growth, a move analysts said on Thursday will be helpful to spur growth in the country after a raft of disappointing economic data since the first quarter.

The provincial government of Heilongjiang has released a total of 65 measures and planned to invest around 300 billion yuan ($48 billion) in civil aviation, railways, and water conservancy sectors in a bid to boost its economic growth and promote reforms, the China Securities Journal, an official newspaper, reported on Thursday.

In addition to Heilongjiang, Southwest China's Sichuan Province also announced on Monday 22 measures to boost investment, consumption and promote economic restructuring.

East China's Shandong Province announced earlier this month that it will build 21 inter-city railways.

South China's Guangdong Province said earlier that it will allocate 64.7 billion yuan to support infrastructure construction, foreign trade and domestic consumption.

"China's economy will possibly see a slight recovery in the second half of this year due to these mini-stimulus measures rolled out by the governments at all levels," Wang Jun, deputy director of the Consulting Research Department at the China Center for International Economic Exchanges, a think tank, told the Global Times Thursday.

The HSBC flash manufacturing purchasing managers' index (PMI) for China showed that China's factory sector also expanded in June with the index unexpectedly rising to 50.8 in June, compared with the final reading of 49.4 in May.

Wang said the PMI reading is "a sign of recovery for China's economy."

But the local governments' enthusiasm for mini-stimulus measures also raised concerns about some possible side effects, and some even worried that the mini-stimulus plans might gradually spiral into excessive spending and create overcapacity and high level of local government debt like what occurred after the massive stimulus plan of 2008.

"If the stimulus measures are too strong, some issues such as a huge debt pileup by local governments and over-heating of the economy are likely to occur," Zhuang Jian, a senior economist at the Asian Development Bank in China, told the Global Times Thursday.

Zhuang also said the central government will strictly monitor and restrict the local stimulus plans to avoid these potential risks.

"Different provinces need to adopt different measures based on their special economic conditions," Wang said.

Chinese Premier Li Keqiang also stressed in two speeches earlier this month that Chinese policymakers will adopt "targeted measures" to resolve the most prominent problems in the country's economy via the most effective tools.

China's central bank announced this month that it will cut the reserve requirement ratio (RRR) by 0.5 percentage points for banks whose loans to the agriculture sector or micro and small-sized enterprises have reached a certain proportion.

The move followed a decision on April 25 to cut the RRR for county-level rural commercial banks by 2 percentage points and that of credit cooperatives by 0.5 percentage point.

"Both the targeted economic control and targeted RRR cut showed the central government's firm determination in stimulating growth in certain sectors that need government support, rather than those sectors with overcapacity, " Wang said.