China will not flood the economy with government investment

China will not flood the economy with government investment as it pursues more stable, healthy economic growth, an official with the top economic planner said Wednesday.

Source: Xinhua

BEIJING, March 1 (Xinhua) — China will not flood the economy with government investment as it pursues more stable, healthy economic growth, an official with the top economic planner said Wednesday.

“Instead, it will focus on supply-side reform for a modest expansion of aggregate demand,” said Li Pumin, secretary general of the National Development and Reform Commission, at a news conference.

Li made the remarks when answering a question on whether China would roll out a major stimulus plan like in 2008.

“Stimulus plans are used to prop up weak demand with government investment under special circumstances,” he said, adding it was different from the scale of fixed-asset investment (FAI).

It was reported that 23 provincial-level regions had announced FAI volume totaling some 45 trillion yuan (about 6.54 trillion U.S. dollars) for 2017, stoking concern of a gigantic stimulus plan.

Li dismissed the worries by saying FAI volume is the aggregate rather than newly-added investment and includes investment from the public and private sector.

The FAI volume of 32 provincial-level regions rose 7.9 percent year on year to 60.65 trillion yuan in 2016 and is likely to hit 65 trillion yuan, Li said.

After China’s economy entered a “new normal” stage, the major difficulties were a by-product of supply rather than demand, he said.

The addition of excessive production capacity and redundant projects will be forestalled, and more efforts will be made to meet demand with effective supply, he added.

China is trying to transition its export- and investment-driven growth model into one that draws strength from consumption, innovation and the service sector.

Consumption contributed 64.6 percent to China’s GDP growth in 2016, up 4.9 percentage points from 2015, official data showed.

Meanwhile, China has decided to adopt a “prudent and neutral” monetary policy this year to keep liquidity at an appropriate level and avoid large injections.

Official data released Wednesday showed that China’s manufacturing purchasing managers’ index expanded for the seventh month in a row to hit 51.6 percent in February, further evidence that the world’s second largest economy is stabilizing amid the uncertain global outlook.