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Economists: Zhu Rongji's pro-active policy once more
Data released in recent weeks shows fixed asset investment -- one of the government's more closely watched indicators -- growing at 27.2 percent in the seven months to the end of July, marginally faster than in the first six months.
Other data remains similarly heady, and most economists in Hong Kong's investment banking community are telling clients to expect only a modest and comfortable slowdown starting in the second half of the year. But their opinions are in stark contrast to economists in state-run think tanks and research outfits under the government, many of which advise Beijing on economic policy, who warn China's expansion is poised to burn itself out and that the government will need to respond. "The government can certainly achieve impressive figures, but there are big underlying problems," said Yuan Guangming, another CASS economist. This is not to say growth is set to screech to a halt. Few economists forecast growth at below eight percent this year or next. But CASS's He said the economy, which grew at 9.5 percent last year, needed to expand by at least 8.5 percent if the government was to meet its target of creating eight million jobs. If it drops below 8.0 percent "there will be a problem". Beijing's last response to a slowdown, during the 1997-98 Asian financial crisis, was to ramp up a massive Keynesian spending program, which has so far seen the issuance of 910 billion yuan (112 billion dollars) in long-term construction bonds. After peaking at 150 billion yuan a year between 2000 and 2003, the issuance program has been gradually cut back, with only 80 billion yuan planned for this year. But He said moves to cut back on government spending were looking increasingly misguided as evidence mounted of a slowdown. "It may be that a lot of government officials have been brainwashed by the
Washington consensus and care too much about fiscal discipline and budget
balancing," he said. "We need a more proactive fiscal policy."
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