Chinese Premier Li Keqiang ruled out major stimulus to fight short-term dips in growth, even as big falls in imports and exports data reinforced forecasts that the world’s second-largest economy has slowed notably at the start of 2014.
Li stressed on Thursday that job creation was the government’ policy priority, telling an investment forum on the southern island of Hainan that it did not matter if growth came in a little below the official target of 7.5 percent.
“We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures,” Li said in a speech.
“We will instead focus more on medium- to long-term healthy development.”
His comments are among the clearest yet on the government’s plans for the economy, which has rattled global investors this year with a surprisingly lackluster performance.
Trade data on Thursday showed exports unexpectedly fell for the second consecutive month in March, the worst showing in more than four years, while imports fell by the most in 13 months.
Exports fell 6.6 percent in March from a year earlier, following an 18.1 percent slide in February, and imports fell 11.3 percent, their weakest performance in 13 months.
Economists were most worried by the fall in imports, which was seen confirming weakness in manufacturing and consumer demand. Some of the fall in exports was attributed to figures early last year being inflated by fake invoices before a government crackdown around the middle of 2013.
“My bigger concern is imports. It suggests a weakening in China’s own economy.” Louis Kuijs, economist at RBS in Hong Kong.
Data on April 16 is forecast to show the economy grew an annual 7.3 percent in the first quarter, the weakest rate since early 2009, in the immediate aftermath of the global financial crisis.
Economists at Barclays lowered their first quarter GDP forecast to 7.2 percent after the trade data, saying it was to reflect more signs of soft domestic and external demand.
The almost unabated run of disappointing data this year has fuelled investor speculation the government would loosen fiscal or monetary policy more dramatically to shore up activity.
But authorities so far have resisted broad stimulus measures. On Wednesday, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks.
Still, authorities have take some steps to bolster growth. Earlier this month, they announced tax breaks for small firms and plans to speed up some infrastructure spending, including the building of rail lines.
The national railway operator now plans to raise its annual investment by 20 billion yuan ($3.2 billion) to 720 billion yuan in 2014.
There have also been moves to cut down on bureaucracy and to open up state-dominated sectors to private investors.
In his speech, Li said China was positioned to sustain a reasonable level of growth over the long term.
“We have set our annual economic growth target at around 7.5 percent,” he said. “It means there is room for fluctuation. It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that.”
Investors have long steeled themselves for growth to slow as China’s economy matures, especially as the government tries to steer it away from investment- and export-driven growth and towards consumption-led activity.
But the extent of the slowdown this year has still been a shock to some.
“A lot of people weren’t expecting growth to slow so quickly,” said Julian Evans-Pritchard of Capital Economics in Singapore.
“For us, it’s not unexpected. You’ve seen credit growth slowing since the middle of last year. We think that the current slowdown is a natural extension of that,” he said, adding it would extend into the June quarter.
Economists have repeatedly cut their growth forecasts for 2014, with a Reuters poll showing growth is forecast at 7.4 percent, a shade below the government’s 7.5 percent target. (Reuters)