(Updates with economist's comment in fourth paragraph.)
May 30 (Bloomberg) -- China has no plan to introduce stimulus measures to support growth on the scale unleashed during the depths of the global credit crisis in 2008 according to the nation's state-run Xinhua News Agency.
"The Chinese government's intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth," Xinhua said yesterday in the seventh paragraph of a Chinese-language article on economic policy, without attributing the information. "The current efforts for stabilizing growth will not repeat the old way of three years ago."
Any restraint on stimulus this time may reflect concern the record lending boom that helped China weather a contraction in trade in 2008-2009 raised the risk of a bad-loan crisis. While Premier Wen Jiabao's call last week for a greater focus on growth was endorsed by the State Council, or cabinet, it left out his recommendation to expand credit.
"The State Council is introducing a measured but still significant set of stimulus measures, which should begin to affect growth in August-September," Standard Chartered Plc economists led by Stephen Green in Hong Kong wrote in a note to clients this week. Concern that a surge in credit would lead to faster inflation and higher property prices will be reflected in "a much more controlled pace of bank lending," they wrote.
Yesterday's Xinhua article made no mention of central bank tools including interest rates and the reserve-requirement ratio, previously used to bolster growth. It carried the byline of two reporters and wasn't labeled as opinion or commentary.
'Not Sustainable'
Pumping in government money to achieve growth targets is "not sustainable" and China will instead focus on encouraging private investments in railways, infrastructure, energy, telecommunications, health care and education, the story said.
China's benchmark Shanghai Composite Index has gained 1.8 percent since Wen's call for growth was published May 20. The National Development and Reform Commission may be accelerating construction approvals as part of China's response, with the planning agency last week saying that Baosteel Group Corp. and Wuhan Iron & Steel Group won permission to build 134 billion yuan ($21 billion) of new factories. The NDRC had delayed approving the two steel projects in 2009, citing industry overcapacity.
China's tilt toward supporting expansion followed data showing trade below forecasts in April and industrial production rising the least since 2009. Europe's debt crisis and austerity measures are threatening exports.
Steps to Come
Agencies including the finance ministry, agriculture ministry and the securities regulator will introduce their own measures to stabilize growth, Xinhua said.
Economists at Credit Suisse Group AG and Standard Chartered Plc said May 28 that stimulus will probably be smaller than the 4 trillion yuan ($630 billion at yesterday's exchange rate) package announced in 2008.
Credit Suisse said spending on investment will probably range from 1 trillion yuan to 2 trillion yuan. Standard Chartered said China is starting a "mini-me" version of the prior stimulus.
China's economy is forecast to expand 8.2 percent this year, based on the median estimate of analysts surveyed this month by Bloomberg News. That would be the least since 1999.
"Unlike in 2008 when the Chinese government rushed to spend, the new stimulus package will be small and modest," said Zhang Xinfa, an economist with China Galaxy Securities Co. in Beijing. Bank lending will play a smaller role in the new round of investment, he said.
The nation has sped up the approval process for major projects, Xinhua said May 28. The country will also encourage greater private investment in banks, according to guidelines released by the China Banking Regulatory Commission in a statement posted on its website May 26.
The People's Bank of China on May 12 lowered banks' reserve ratios by 50 basis points, the third cut in six months.
--With assistance from Scott Lanman in Beijing. Editors: Chris Anstey
To contact Bloomberg News staff for this story: Bloomberg News in Beijing at xzhou68@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
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