MNI EXCLUSIVE: China Stimulus Could See 3% Growth: Advisors

--With Fiscal Package Seen 10% Of GDP, Best Case Growth Over 5%

By Wanxia Lin

     BEIJING (MNI) - China's planned CNY 11 trillion fiscal expansion could help

annual growth hit 3% this year, despite disappointment in some quarters over the

size of stimulus package, policy advisors told MNI, with some expecting GDP to

rise by as much as 5% in the best-case scenario.

     China plans to raise its deficit by CNY1 trillion in 2020 to CNY3.76

trillion (over 3.6% of GDP), issue CNY1 trillion special Covid-19 treasury bonds

and push forward CNY2.5 trillion in tax and fee cuts, while assigning an

increased CNY3.75 trillion quota to special purpose bonds for local governments

to boost infrastructure investment, according to the latest Government Work

Report delivered by Premier Li Keqiang.

     Han Yongwen, a delegate to the National People's Congress noted the tax and

fee cuts adopted last year would carry over into 2020 resulting in a further

CNY500 billion in reductions and leading to a possible cut of around CNY3

trillion in total. Adding this all together, the stimulus package will total

CNY11 trillion (USD1.6 trln).

     --GROWTH RATE

     "Such an expansion is about 10% of last year's GDP, and could almost ensure

about 3% growth this year," said Zhang Yiqun, director of a fiscal studies

institute affiliated with the Jilin province finance department.

     "In a best-case scenario, China could achieve growth as high as 5%," Zhang

added, noting the economy may grow 2-3% without any stimulus and the policies

adopted this year could contribute as much as another two percentage points.

     Helped by China's advantages from strong economic fundamentals and control

of the Covid-19 outbreak, it can implement smaller fiscal packages than those

adopted by some western countries, said Han, who's also the vice chairman of the

China Center for International Economic Exchanges.

     Though Beijing has not set an official growth target, many think hitting

the goal of 9 million new jobs this year would require growth around 3%. Han

agreed and said growth "could be slightly higher than 3% if the policies to

boost domestic demands kick in".

     --DRIVER

     According to Han, a former vice governor of the Hunan province, China will

spend over 43% of GDP on investment which will be the key economic driver this

year, probably making up for the loss of exports and consumption.

     He also noted that although online spending had increased significantly

since the coronavirus outbreak, offline sales including tourism are still being

held back by virus controls. "Further recovery should focus on achieving a quick

rebound of spending by low- and middle-income groups," said Han.

     Yu Miaojie, deputy dean of the National School of Development at Peking

University agreed that the latest package is enough to offset the Covid-19 hit

and ensure 3% growth. He noted that there also is CNY18 trillion of budget

revenue available, adding up to around CNY30 trillion of fiscal stimulus this

year.

     Yu said he does not rule out the possibility of 5.3% growth if the

potential of the proactive fiscal, prudential monetary and opening policies kick

in fully.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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