DAVOS, January 29, 2009 (AFP) – China may face "severe challenges" now because of the economic crisis, but Premier Wen Jiabao and businessmen are confident the country will soon be on the fast-track to growth.
Wen acknowledged at the World Economic Forum in Davos that the financial crisis has hit China hard with growth collapsing in recent months.
He stressed that economic growth must hit 8.0 percent this year to stop social discontent boiling over. "We think we must maintain growth at 8.0 percent this year. This is necessary and can be managed through hard work," Wen said in answer to a question on stability in China.
"To be honest, it will be a tall order to achieve a growth rate of 8.0 percent in 2009 but I am sure it can be attained with hard work," Wen said.
The figure is markedly higher than the 6.7 percent growth for 2009 projected by the International Monetary Fund, well below its average of recent years.
China has set out a four trillion yuan (590 billion dollar) stimulus package and Wen said he was "full of confidence" that China\’s economy will soon be back to the fast-pace growth that the country has become used to.
"Where does our confidence come from? It comes from the fact that the fundamentals of China\’s economy remain unchanged," he said.
The stimulus money is to be spent on tax cuts, public housing and helping the rural population — badly hit by unemployment — railway and infrastructure projects, environmental protection and rebuilding after the earthquake of last year in southern China, according to the premier.
"Our economy remains on the track of steady and fast development," he said.
Wen said the government was also confident because the conditions that have allowed for 30 years of spectacular growth remain unchanged — a well trained "relatively low cost labour force" and a huge trade balance which allows for the injection of cash when needed.
The Chinese system, though criticised by rights groups and foreign governments, "enables us to mobilise the necessary resources for big undertakings. There is harmony and stability in our society," Wen said.
Business leaders also expressed optimism about the growth target.
"I remain very optimistic about the Chinese economy in 2009 because there is still room for domestic development," Wang Jianlin, vice chairman of China\’s Federation of Industry and Commerce, told AFP.
He said he believed the Chinese economy could grow by 8.0-9.0 percent this year.
Wang, chairman of property firm Dalian Wanda Group, said real estate sales were typically slower in November and December as fewer Chinese were keen on big purchases in the run-up to Chinese New Year, but the group achieved more sales in December than in July.
"Prices are also rebounding, not just in real estate. Prices of food products are also moving up," he said.
Wang expects the government to unveil another round of stimulus measures next month, including interest rate and tax cuts.
"So by the third, fourth quarter, we should see a strong rebound," he said.
Li Shufu, chairman of carmaker Geely Holding said he was "still very optimistic about the Chinese economy this year."
Without giving percentage figures, he said sales were sharply higher in December and January.
While he would not make a projection for full-year growth, he said new government measures such as tax cuts for smaller vehicles should stimulate sales in March.
Both businessmen said it was "responsible" for China to continue contributing to world growth.
But Wang would not go as far as to say that China would save the world economy.
"No, not a saviour yet. When China\’s economy makes up a third of world economic growth, you can say that," he said, noting that it contributed to 22 percent of world growth last year.