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Chinese Economy Set to ‘Recover Strongly,’ Fan Says

China’s economy will recover strongly in the second and third quarters as a 4 trillion yuan ($585 billion) stimulus package takes effect, central-bank adviser Fan Gang said.
“The 4 trillion yuan is different from the U.S. stimulus package -- we don’t have a financial black hole to fill, so all this money will go to the economy and drive demand,” Fan said today at a conference in Hong Kong. He said the economy had “already seen some recovery.”
China’s growth slid to the weakest pace in seven years in the fourth quarter as trade slumped because of the global recession. Fan said he saw positive signs across investment, household consumption and real estate, and the stimulus will help the government to meet its target of an 8 percent expansion this year.
“It won’t be easy reaching 8 percent with the plunge in exports and the drag on production from falling external demand,” said David Cohen, an economist with Action Economics in Singapore. “But China does have more potential than most places to offset export weakness with domestic demand.”
The yuan traded at 6.8313 against the dollar as of 3:20 p.m. in Shanghai from 6.8296 yesterday.
China’s economy, the world’s third biggest, may be the first to recover from the global recession because of the stimulus spending, Zhang Yutai, director of the Development Research Center of the State Council, said March 23.
‘Early Signs’
China’s growth slowed from 13 percent in 2007 to 6.8 percent in the fourth quarter of last year.
The nation is weathering the global slowdown better than many others because its banks were largely unscathed by the financial crisis and the government quickly implemented its stimulus plan, the World Bank said in a March 18 report. It saw “early signs” that China’s economy is stabilizing.
Still, it cut its forecast for China’s growth this year to 6.5 percent from a previous estimate of 7.5 percent.
Lending and spending have surged as the stimulus package kicks in. Urban fixed-asset investment rose 26.5 percent in the first two months of 2009 and new loans quadrupled in February.
Premier Wen Jiabao said on March 13 that China has “adequate ammunition” to revive the economy and can add to the stimulus package at any time. The government is planning a record 950 billion yuan budget deficit this year.
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

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