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'Steps needed' to maintain stable economy 

By Xin Zhiming and Wang Bo (China Daily)
Updated: 2008-10-21 07:32

Fixed-asset investment and retail sales growth remained sound in the first nine months of the year, but the government still needs to take steps to maintain a stable economy, analysts said Monday.

This is important because the global slowdown could bite into the country's GDP growth.

The overall fixed-asset investment grew 27 percent from January to September, up 1.3 percentage points year-on-year, Li Xiaochao, spokesman for the National Bureau of Statistics (NBS) said Monday.

Retail sales rose 22 percent to 7.79 trillion yuan ($1.14 trillion) in the first nine months, up 6.1 percentage points year-on-year.

China's producer price index rose 8.3 percent year-on-year in the first three quarters, which means the real growth in fixed-asset investment could be much lower, analysts said. The real retail sales growth would ease, too, if the price factors were taken into consideration.

"That is in line with the overall economic situation," said Zuo Xiaolei, chief economist with the China Galaxy Securities.

The reduction in the demand for Chinese exports because of the global economic downturn has slowed its trade, dragging the overall economic growth to 9 percent in the third quarter.

Since the country's growth is slowing, "an aggressive fiscal policy could be announced very soon, with an expected fiscal deficit of 1 percent of the GDP in 2009," Huang Yiping, an economist with the Citigroup, said in a research note. Last year, the ratio was 0.8 percent.

"The investment for the remaining quarter of this year, along with household spending, will be the key factor in keeping the economy moving forward," said David Melser, an economist with Moody's Economy.com.

In response to the present crisis, the country's top leadership has vowed to increase government spending to shore up the investment and domestic demand during the rest of this year and in 2009.

This was reflected at the recent Third Plenary Session of the 17th Central Committee of the Communist Party of China (CPC) and State Council meetings.

The CPC session, especially, decided to increase inputs in rural areas, which are expected to attract more investments in infrastructure and other sectors to boost domestic demand, analysts said.

The priority spending areas, Huang said, would be education, healthcare, the social security system and low rental housing.

Fast train and subway projects in urban areas will receive more funds, analysts said. And Zuo suggested policymakers raise prices of grain to increase farmers' income so that they could spend more and help increase retail sales.