.bmp)
.bmp)
HONG KONG-The Chinese government has begun drafting tax and spending policies to stimulate the economy after third-quarter growth of 9 percent, the slowest pace since an outbreak of Sars in 2003.Industrial production and construction slackened from July through September because of weak exports, a slumping real estate market and temporary restrictions imposed during the Olympics, China’s National Bureau of Statistics announced on Monday. China’s State Council, or cabinet, met over the weekend and decided to shift the emphasis toward maintaining, “a stable and rapid economic development,” the state-controlled media reported on Monday. The previous policy had been, “to ensure growth and control inflation.”As part of the new policy, the State Council announced that it would increase export tax rebates for everything from labor-intensive products like garments and textile to high-value products like mechanical and electrical products. Banks will be encouraged to lend more money to small and medium-size enterprises and support programs will be drafted to help farmers, the government said.Government agencies will also spend more to rebuild earthquake-damaged areas of southwestern China, to improve transportation links and other infrastructure and to improve the social welfare system, the official Xinhua news agency said, without providing details.Hu Angang, a prominent Chinese economist who is the director of the Center for China Studies at Tsinghua University in Beijing, said in an interview on Friday that the government was drafting plans to step up its spending on vocational training and other educational programs for adults. The goal is to help China’s workers move away from low-wage, low-skill assembly line tasks in export-oriented factories, and provide these workers with the skills necessary for an internationally competitive economy that balances the service and manufacturing sectors.“The government needs to give consideration to human capital investment,” Mr. Hu said.Chinese officials insist that their country will only suffer limited harm from the global financial crisis, mainly through slower exports. “Our economy remains vigorous and has the capability to defend itself against international risks,” Prime Minister Wen Jiabao said on Friday.Increased export tax rebates will make Chinese exports even more competitive in the United States and Europe, particularly as China has intervened heavily in currency markets to halt any further appreciation of China’s currency since mid-June. But with the United States heavily dependent on China to buy the Treasury bonds needed to finance a bailout of the American financial system, the Bush administration has stopped criticizing China’s trade and currency policies. Policy makers in almost any country except China would be delighted with 9 percent growth, particularly given the financial turmoil that was worsening at the end of the third quarter.India’s central bank announced on Monday that it was cutting its benchmark interest rate by a full percent, to 8 percent, as annual growth in industrial production there has slowed to a crawl.Hong Kong authorities said on Monday that unemployment in the territory crept up to 3.4 percent for the period from July through September, compared with 3.2 percent for June through August. But China faces a particularly acute need to maintain high growth rates. Its cities are growing by nearly 20 million people a year, mainly because of migration from lower-income rural areas. Most economists estimate that 8 percent growth is needed to prevent urban unemployment from rising, which could ignite demonstrations and undermine the country’s social stability.Clement Chen, the chairman of the Federation of Hong Kong Industries, which represents the employers of 10 million workers in mainland China, said that the policies chosen by the State Council would reduce the number of factory bankruptcies and layoffs likely in the months ahead. But he predicted the policies would not halt the overall deterioration in business prospects for exporters in China.“The worst impact, the worst situation, is not here yet,” he said.“I do believe 2009 will be worse than 2008.”
By KEITH BRADSHER
To read more go to:
As in the days of Noah...
