Wen Growth Pledge Spurs Speculation of China Stimulus

Chinese Premier Wen Jiabao’s pledge to focus more on bolstering growth spurred speculation the government will step up efforts to combat a slowdown in the world’s second-largest economy.

Wen called for “putting stabilizing growth in a more important position” and didn’t mention concern about inflation in remarks published yesterday by the official Xinhua News Agency. China may announce stimulus actions in the near term, according to a front-page commentary today in the China Securities Journal, which is published by Xinhua.

The shift in language suggests authorities are “seriously concerned about growth” and “ready to introduce further measures,” Bank of America Corp. said in a research note today. The government on May 12 cut banks’ required reserves for the third time in six months following data that showed trade, industrial production and lending were below forecasts in April.

“The April data has been a wake-up call for China,” said Alaistair Chan, a Sydney-based economist at Moody’s Analytics. “There will probably be some stimulus measures through monetary policy, more bank lending and infrastructure projects being brought forward.”

China has allowed the yuan to weaken against the dollar this year after it strengthened 4.7 percent in 2011. The currency rose 0.06 percent today, the most in a month, to 6.3243 at 11:56 a.m. in Shanghai, following a decline of about 0.5 percent in 2012 through May 18. The MSCI Asia Pacific Index of stocks rose 0.5 percent at 12:56 p.m. in Tokyo.

The Xinhua report on Wen’s weekend visit to Wuhan, the capital of Hubei province, was reposted yesterday on the government’s website, attributing the information to the State Council’s general office.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell