China pledges economic changes

Will boost government spending if needed, new leaders say

Women look at displays at a shopping mall in Beijing on Monday, the day after China’s new Communist Party leaders promised to continue long-term plans aimed at nurturing self-sustaining growth and raising incomes.
Women look at displays at a shopping mall in Beijing on Monday, the day after China’s new Communist Party leaders promised to continue long-term plans aimed at nurturing self-sustaining growth and raising incomes.

— China’s new Communist Party leaders are promising changes aimed at reducing reliance on exports while increasing spending if needed to prop up a shaky economic recovery.

In their first economic goals statement since taking power in November, new party leaders Sunday pledged to continue long-term plans aimed at nurturing self-sustaining growth and raising incomes.

While the statement didn’t indicate any major changes or new economic stimulus efforts, the new leaders promised to support domestic consumption, the growth of small businesses that generate jobs and more migration by rural residents into expanding cities to find better-paying jobs.

Party General Secretary Xi Jinping and other leaders are under pressure to overhaul an economic model based on exports and investment that delivered three decades of rapid growth but is running out of steam. Companies and political analysts are watching to see how far the leadership is willing to go in remodeling the state-dominated economy.

In the shorter term, leaders also need to keep a recovery from China’s deepest economic downturn since the 2008 global crisis on track.

Party leaders promised a“proactive fiscal policy” and “prudent monetary policy” in a statement distributed by the official Xinhua News Agency at the end of a two-day annual planning meeting. That refers to willingness to boost government spending if needed and to keep credit easy so long as inflation stays low.

The world’s second-largest economy is limping out of the slump that pushed growth to a 3 1/2 year low of 7.4 percent in the latest quarter, but weak November trade data suggested the rebound might be faltering.

The World Bank and other analysts say Beijing needs to curb dominant state companies and promote service industries and consumer spending to keep incomes rising.

However, changes face potential opposition from state companies that have influential allies in the party and are worried that their privileges will be diminished.

In a tacit acknowledgment of possible obstacles, Sunday’s statement said change would require “greater political courage and wisdom.”

The new leadership promised to “accelerate structural reform,” open markets further and encourage efficiency, though they gave no details of possible changes.

Factory output, consumer spending and other indicators are improving in the current quarter, but analysts say a recovery is likely to be gradual and too weak to drive a global rebound without improvement in Europe and the United States.

Data released last week showed China’s November trade deteriorated sharply after a rebound that started in August. Export growth plunged to 2.9 percent from October’s 11.6 percent. Imports were flat, down from October’s 2.4 percent growth.

Sunday’s statement gave no indication the leadership plans to depart from the party’s official annual economic-growth target of 7.5 percent through 2015.

It promised to support the orderly growth of cities, a key element in raising incomes by allowing migrants from the countryside to look for better paid urban jobs.

Bloomberg News reported that Zhou Xiaochuan, governor of the People’s Bank of China, spoke Monday of limits on change, saying China will keep controls on short-term capital flows even if it implements deeper convertibility of the yuan.

China won’t welcome capital flows such as those by some hedge funds that enter or exit the country in one or two weeks, Zhou said at a conference in Sanya, China.

Wu Xiaoling, a former People’s Bank of China deputy governor who’s now deputy director of the financial and economic committee of the parliament, said at the same event that circumstances will be right in 2013 to further loosen controls on interest rates.

Business, Pages 23 on 12/18/2012

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