China Plays Down Stimulus Talk as Xi Trumpets New Normal Growth

JANUARY 08, 2015

Chinese President Xi Jinping in a May 21, 2014 file photo.(Reuters Photo/Aly Song)

China isn’t planning to expand fiscal spending to stimulate growth, according to the economic planning agency, as President Xi Jinping said the country is able to maintain a “medium to high growth” rate.

While China is promoting key investment projects in seven areas to woo private capital, it isn’t repeating its stimulus program started in 2008, Luo Guosan, an investment official with the National Development and Reform Commission, said at a press briefing on Thursday. China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year, people familiar with the matter who asked not to be identified as the decision wasn’t public said this week.

“It’s not a stimulus program by expanding fiscal input, it’s about guiding social capital into investment projects,” Luo said.

“It has nothing to do with the 4-trillion-yuan stimulus plan in 2008, and it is fundamentally different from that.”

At the same time, Luo said China is promoting “seven project packages,” including infrastructure, environment and healthcare, and many are underway. Premier Li Keqiang’s government approved the projects as part of a broader 400- venture, 10 trillion yuan plan to run from late 2014 through 2016, said the people familiar with the matter.

President Xi told a Latin America forum in Beijing that China’s economy has entered a “new normal,” a phrase adopted to reflect a push to manage a slower expansion.

Stable growth

“Xi Jinping’s fast and comprehensive power consolidation in 2013-14 means a shift of focus to stable economic growth, more proactive fiscal policies, more responsive monetary policies and more aggressive reforms in 2015,” Bank of America Corp. economist Ting Lu wrote in a note.

The NDRC’s Luo declined to specify the size of the reported investment package, saying “the total amount of investment is unable to define.”

Ding Shuang, senior China economist at Citigroup in Hong Kong, said Thursday’s NDRC interpretation confirmed his view that the investment acceleration isn’t stimulus and is included in 2015’s planned fixed-asset investment.

“It means that there will not be additional fiscal or monetary spending, but they’ll redirect money into targeted areas,” he said. “So this is structural adjustment.”

The NDRC has also relaxed requirements for companies to get approval for outbound investment, the newspaper Economic Observer reported. Companies only need to register at, rather than get approval from, the NDRC if projects aren’t related to sensitive countries and industries, according to the newspaper, citing revised guidelines.

Currently, the economic planning body requires companies to get approval for all outbound investment projects worth $1 billion or more.