China's 'Missing' Stimulus [WSJ]
By ANDREW PEAPLE
While the U.S. government is being accused of socialism, China's Communist Party isn't being as socialist as some expected.
Absent from Chinese Premier Wen Jiabao's keynote speech to China's National People's Congress on Thursday was the announcement of any major new fiscal stimulus plan. Confident that one was coming, investors bid up share prices around the world in anticipation.
In retrospect, those hopes were always overdone.
Beijing's existing $585 billion stimulus plan, unveiled last November, is barely out of its wrapping: while China's capacity to absorb it fully is already in doubt.
Less than a third of the $15 billion slated for disbursement in 2008's fourth quarter was actually spent by the end of December, a government official said Wednesday. Worries that corruption in the localities will cause stimulus funds to be wasted are also leading Beijing to keep a grip on the fiscal tap.
And spending isn't all that China's offered up in defense of its economy. Banks, encouraged to lend by Beijing, have begun to do so in earnest, while specific measures to support ten different industries are in the pipeline.
The government is now waiting to see if all this is enough for Chinese economy to grow by its perennial 8% target in 2009. Meanwhile, it doesn't want to give the impression of panic by adding another major initiative before the impact of the first is clear.
One worry: Isolated green shoots of recovery could be leading to unwarranted complacency in Beijing's hierarchy. China's purchasing managers' index has risen for three months in a row, for example, but it's still in contractionary territory. Bank lending is up, but anecdotal evidence suggests some of that is flowing into stocks, or simply being hoarded.
So ruling out the eventual addition of another stimulus plan would be a mistake -- if only because China still has room to do more. Even with the current plan, government debt is projected to remain under 3% of GDP this year -- a level that's surely envied by some of the world's biggest economies.
Still, China does few things hastily. Including, as investors learned Thursday, pouring money onto a plan that's hardly had time to work. |
