Page last updated at 09:29 GMT, Friday, 6 March 2009

China to be 'decisive' on economy

Zhang Ping (R) answers a question as Zhou Xiaochuan (L) listens at an NPC press conference on 6 March 2009
Both Mr Zhou (L) and Mr Zhang (R) were cautiously optimistic

China's central bank governor, Zhou Xiaochuan, has said China will respond quickly and dynamically to cope with the global economic slowdown.

The government would wait to see if its economy needed more stimulus spending.

But monetary policy would be flexible to help spark renewed growth while keeping the currency, the yuan, stable.

Mr Zhou and two colleagues were answering questions at a news conference during the annual session of China's National People's Congress.

National Development and Reform Commission (NDRC) Chairman Zhang Ping said officials would wait and see if more stimulus spending were necessary, beyond the 4 trillion yuan ($586bn, 413bn) already announced.

"Whether we need to adopt new measures will depend on the changing circumstances," he said.

Decisive and flexible

Mr Zhou said China had watched other countries cope with the global slowdown and wanted to avoid the mistakes of acting too slowly, or too weakly.

"In particular, we have to avoid being too slow-handed or light-handed in responding. We must err on the side of being quick and decisive," he said.

Zhang Ping (R) answers a question as Zhou Xiaochuan (L) listens at an NPC press conference on 6 March 2009
The sheer number of recent investments by Chinese interests in non-domestic commodities and energy businesses has been striking

There were signs that China's economy was responding to measures undertaken so far, he added, and policies to date had "achieved significant results".

"We are also seeing that the economic figures are stabilising and recovering, which demonstrates that the policies have begun to show an impact," he added.

He said government targets for new lending were "guiding or anticipatory" but not binding.

"In confronting this new situation, there must be flexibility in exercising a moderately loose monetary policy," he said.

Cautious confidence

His tone of cautious optimism that China was finding ways through the economic crisis was echoed by Mr Zhang. "Some numbers are showing signs of containing the downturn or of revival," the NDRC head said.

"Of course, we can't complacently assume that we can entirely avoid the impact of the crisis or that our measures are already enough to counter it. We must closely observe the changing developments.

Steamed bun vendor, Shenyang, Liaoning province, China 5 Mar 09
China aims to achieve social stability while coping with global economic woes
"But I believe that, with the measures that we've taken or will take, we can have full confidence of escaping the current hardships and can fully respond to this crisis, because in the long term, our economic conditions are not fundamentally different," he said.

He also provided an outline of where the stimulus money would go, with $85bn dedicated to helping firms improve technology and energy efficiency.

Another $54bn would go on rural infrastructure and $219bn on rail links and highways. Education and health would receive $22bn, while $145bn would go to reconstruction work in the earthquake-hit Sichuan region, he said.

China would issue policy loans with low interest rates for certain big projects when necessary, he added.

China's finance minister Xie Xuren said the budget deficit remained within safe limits at less than 3% of gross domestic product.

"This is something that our country can handle and remains at a safe level," he said.

The comments from China's top economic policy makers came a day after Premier Wen Jiabao told the NPC that the country faced its most difficult year in modern times.

World markets had risen on hopes China would announce new stimulus funding and fell when Mr Wen did not announce fresh spending.

Mr Wen said China would increase deficit spending this year to hit the 8% growth target regarded as necessary to forestall social unrest.

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