FT Alphaville " Wen to the rescue Asian markets were mostly in positive territory early on Monday, which was widely attributed to comments by Chinese premier Wen Jiabao on Sunday, emphasising the need for more support amid signs that growth is sputtering. From Bloomberg: "The country should properly handle the relationship between maintaining stable and relatively fast growth, adjusting the economic structure and managing inflationary expectations," Wen said. We should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth. Current economic operations are generally stable and growth is still within the expected range, but the domestic and external environments are becoming even more complex, Wen said. The statement separately cited officials from six provinces including Guangdong as saying during a meeting with Wen that "there are prominent problems seen in areas including insufficient demand and falling profits in some industries and companies. The economy is facing increasing downward pressures. As Bloomberg reported, several analysts took this as a sign of serious concerns about growth after recent poorer-than-expected economic data. It was also interpreted as signalling monetary and fiscal stimulus, with the latter particularly focused on infrastructure, as per the current five-year plan. Predictions of more RRR cuts abound, as well as some forecasts for cuts to benchmark lending rates and interest rates. Societe Generale's Wei Yao writes that Wen's position was clarified on Monday courtesy of two Xinhua editorials: The main messages from the editorials were very much in line with our expectations that there will be more easing, but a repeat of 2009/10 is not desired. Xinhua said explicitly that "stabilizing growth is not a simple-minded pursuit of the speed," but rather "a means to facilitate continuous improvement of economic quality." The Premier singled out several areas to work on and Xinhua summarised as follows: 1) to boost household consumption with consumption subsidies (and other policies); 2) to stabilise investment demand, with focuses on key infrastructural projects (railways, environmental protection, infrastructure in the rural areas and in the west, etc.) that are shovel-ready; 3) to lower the tax burden on corporates; but 4) no major changes in property policy - suppressing speculative demand while supporting first-time buyers. The maintenance of property-buying restrictions is interesting because it's seen by some as a key element of the government's tactics to slow growth; just this weekend it was cited by Samsung as a key reason for their lowered expectations of consumer electronics demand in 2012: Yet it's also something policymakers are not about to back away from. Andy Xie and Patrick Chovanec have both hypothesised that China won't lift the restrictions on buying investment apartments in the bigger cities any time soon because it would probably fail to magically return the economy to its target growth rate, thus exposing limits to the degree the central government can now manage the economy. Related links: Wen Growth Pledge Spurs Speculation of China Stimulus - Bloomberg China's economic data disaster - FT Alphaville This entry was posted by Kate Mackenzie on Monday, May 21st, 2012 at 10:21 and is filed under Capital markets. Tagged with china, Chinese consumers, Chinese economy, chinese growth, Chinese property.