China's economy bottoming out

SHANGHAI Mon Apr 20, 2009 5:48am BST

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SHANGHAI (Reuters) - China's economy is bottoming out, which will pave the way for needed reform of the resources tax, Jia Kang, head of research at the Ministry of Finance, wrote in a commentary in the official China Securities Journal on Monday.

Meanwhile, the government should decide to implement further expansionary policies by the end of June, at the latest, if data for the second quarter turns out to be worse than expected, Jia said.

Although China's economy may begin to recover later this year, growth is expected to remain low for three years, while the cycle for expansionary economic policies may last five years, Jia said.

Separately, the head of a government think-tank warned that risks to official budget projections were more acute after the first quarter in which fiscal expenditures rose by 34.8 percent while revenues fell by 8.3 percent.

The government's forecast of a 950 billion yuan (94.3 billion pound) deficit may prove too small should these trends continue, Pei Changhong, head of the Institute of Finance and Trade Economics in the Chinese Academy of Social Sciences, was quoted as saying in the China Securities Journal.

China registered its weakest quarter on record with growth of 6.1 percent in the first quarter from the year-ago period, but that reflected a pick-up in quarter-on-quarter growth, and March data offered more signs of a gradual recovery.

The improving picture dampened speculation that China might unveil a major new spending package to follow the 4 trillion yuan ($585 billion) two-year stimulus plan it unveiled last November, though the government has pledged to adjust its plans as needed.

(US$1=6.832 Yuan)

(Reporting by Samuel Shen and Simon Rabinovitch; editing by Ken Wills)

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