Pointing the Way Forward
China's top leadership convenes to map out economic and reform plans for 2015
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Cover Stories Series 2014> Reform Initiatives Underway for 2015> Retrospect> Feature
UPDATED: July 21, 2014 NO. 30 JULY 24, 2014
Mini-Stimulus, Maximum Effect
Measures targeting weak economic sectors have produced the desired results in boosting GDP growth
By Deng Yaqing

In fact, the astounding figure represents an optimistic prediction local governments made in attracting investment, not their planned expenditure in the following years. In other words, the 10 trillion yuan is stock, not incremental. In contrast, the 4 trillion yuan was incremental investment made by the Central Government.

"The 10 trillion yuan, which may be invested in railway construction and renovation of shantytowns, doesn't come from the government, but from private capital," said Xu, adding that all the money raised will be used to improve people's livelihood rather than flowing to vanity projects.

"From this perspective, these mini-stimulus measures and investment plans can act as a boost to reforms," said Xu.

More to come?

In the second half of this year, more measures are likely to be unveiled to continue stabilizing economic growth. Guan Qingyou, Vice President of Minsheng Securities Research Institute, said that the central bank will continue the targeted reduction of reserve requirement ratios to increase money supply and supporting weak links and key sectors such as agriculture, small and micro-businesses, and the renovation of shantytowns.

In addition, the central bank may also relax credit limits and give more support to the real economy, paying attention to the area of housing mortgage loans in particular.

Zhou Jingtong, a senior researcher from Bank of China's Institute of International Finance, stressed the role of fiscal policies in stabilizing growth. He said that more fiscal expenditure should be committed to funding the construction of railways in central and west China, renovating shantytowns, encouraging scientific and technological innovation, advancing environmental protection and strengthening infrastructure construction.

While ensuring steady economic growth through these measures, economists suggested reform act as the engine.

"In the short term, the focus should be on stabilizing growth. But at the same time, attention should be paid to propelling reform," said Li Daokui, a renowned economist from Tsinghua University.

Reform on state-owned enterprises, the expansion of mixed ownership, breaking up monopoly and reducing governmental intervention should be carried out. Li said it's urgent to motivate the governments to forge ahead with the reform and streamline administration while combating corruption and bureaucracy, which is a key factor to inspire the vigor of China's economy in the coming years.

Email us at: dengyaqing@bjreview.com

Major Mini-Stimulus Measures in the First Half

- Investment

On April 2, the State Council decided to speed up railway construction in the central and western regions, with 6,600 km of new railway lines planned for 2014 nationwide, and establish a railway development fund worth 200-300 billion yuan ($32-48 billion) a year.

On April 2, the State Council decided to facilitate the renovation of rundown communities in urban regions sell bonds to institutional investors to support the renovation and infrastructure construction in urban areas.

On April 23, the State Council decided to encourage social capital to participate in infrastructure construction by opening 80 projects to public bidding, such as the construction of railway, ports and information infrastructure.


On April 8, the Ministry of Finance announced that small and low-profit enterprises with a taxable income not exceeding 100,000 yuan ($16,110) should pay corporate income tax at the rate of 20 percent on only half of their taxable income. The preferential policy is effective from January 1, 2014 to December 31, 2016.

- Finance

On April 25, the central bank trimmed the reserve requirement ratio for county-level rural commercial lenders by 2 percentage points and that for rural credit cooperatives by 0.5 percentage points.

On June 16, the central bank lowered the reserve requirement ratio for commercial banks that issue a certain proportion of loans to small and micro-businesses and agricultural projects by 0.5 percentage points.

On July 1, the China Banking Regulatory Commission adopted a new method of calculating the loan-to-deposit ratio to allow lenders to extend more loans.

(Compiled by Beijing Review)

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