China has no immediate need for stimulus - ADB


Posted at Mar 24 2014 03:02 PM | Updated as of Mar 24 2014 11:02 PM

BEIJING - China's economy may still grow around 7.5 percent this year despite signs of a slowdown, and there is no immediate need for the government to roll out fresh stimulus measures, Asian Development Bank (ADB) President Takehiko Nakao said on Monday.

Nakao, former Japanese vice finance minister for international affairs, told Reuters he expects China's economic growth to be still roughly in line with the government's target.

ADB is revising its forecast on China's growth for 2014, currently at 7.5 percent, he said, but did not elaborate.

Chinese leaders face a challenge to keep the economy on an even keel while forging ahead with a long list of market-based reforms announced at a key party meeting late last year, he said.

He said that some short-term stimulus might be needed to smooth out ups and downs in the economy, but there was no immediate need as growth remains healthy due to the country's ongoing urbanisation and rising consumption.

"At this moment, I don't think China needs to resort to a stimulus package," he said.

"Our judgment of China's economic growth is that it will continue to grow at the rate of around 7.5 percent."

Concerns about the health of the Chinese economy are mounting after a string of data showed growth is faltering, raising doubt over the fulfillment of the growth target in the absence of fresh stimulus measures.

Activity in China's factories slowed for a fifth straight month in March, a preliminary private survey showed on Monday, raising market expectations of government stimulus to arrest a loss of momentum in the world's second-largest economy this year.

Nakao said he was impressed by Chinese leaders' commitment to market-oriented reforms to help put the economy on a more sustainable footing, but they needed time to implement them.

Liberalising interest rates and the currency regime in China should "go hand in hand", and interest rate liberalisation could be carried out in a step by step manner to ward off possible banking risks, he said.

He said Asian economies were more prepared to cope with any economic turbulence and the region's fundamentals were much stronger than there were during the Asian financial crisis in the late 1990s.

"They are more prepared to take action quickly if there are signs of instability," he said.

"Fragility? I don't buy that idea. Of course, we cannot be complacent, we should always be prepared."

Japan's monetary policy easing, which has supported the economy and boosted the country's foreign direct investment flows to the rest of Asia, could help offset any impact from the withdrawal of U.S. monetary stimulus, Nakao said.

Nakao was named ADB chief in April 2013, replacing Haruhiko Kuroda, who became Bank of Japan governor.