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Stronger steps needed to boost growth: Hu

Katherine Ng

Wednesday, February 25, 2009

Stronger measures are needed to boost domestic consumption so that China can sustain economic growth, President Hu Jintao said yesterday.

He warned that the risk of deflation is rising, putting pressure on society.

"China's advantageous economic conditions have not fundamentally changed, but downward pressure on economic growth has intensified," Hu was cited by state radio as saying during a State Council meeting.

The remarks came as the National People's Congress and the Chinese People's Political Consultative Conference prepare to begin their annual sessions next week.

On Monday, the central bank warned in its quarterly report that downward pressure on economic growth would increase if nothing is done to lift domestic consumption.

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The People's Bank of China said that pressure for prices to fall is strong when demand shrinks.

However, economists said financial markets should not "expect too much from the NPC."

"The NPC is likely to discuss macro policies that have near- and medium-term implications in view of the fast deteriorating global growth outlook, rather than detailed, actionable policy points," JPMorgan chief economist Frank Gong said.

"Top of the agenda will be to pass the Social Security Law, approve proposals for medical reform and discuss educational reform," he said.

Measures such as shopping vouchers or incentives to home-buyers would be left to local governments to implement when a decision is reached.

"Policy measures to stimulate near-term consumption and growth are unlikely to be implemented at the national level, given the huge discrepancy in consumption patterns across different regions of China," Gong said.

He added it is unlikely that any decision on raising the income tax threshold will be announced during the NPC session.

China has set an 8 percent target for economic growth this year.

Its top priority is retaining jobs.


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