China to avoid resorting to large stimulus measures to boost economy, says state news agency Xinhua; slowing growth has rattled global investors, fueled speculation about stimulus

Cindy Allen

Cindy Allen

BEIJING , April 7, 2014 () – China is going to avoid going down the "familiar path" of resorting to large stimulus measures for the economy, and there is no sign of a shift in monetary and fiscal policy, state news agency Xinhua wrote in a commentary on Monday.

Flagging growth has unnerved global investors and fuelled speculation about a modest stimulus package to boost activity.

But Xinhua, in an English-language piece, dismissed speculation about any stimulus package in the offing.

"A 'mini stimulus' theory has been widely circulated after the State Council announced a set of policies on Wednesday," it wrote.

"However, any talk about an incoming stimulus package is misleading and those anticipating the kind of stimulus China unleashed following the 2008 global financial crisis are likely to be disappointed," Xinhua added.

Such commentaries are not official policy statements, but can be read as a reflection of government thinking.

China acted for the first time this year to steady its stumbling economy by cutting taxes for small firms last Wednesday and announcing plans to speed up the construction of railway lines.

The government also said it would lower tax rates for smaller companies by relaxing the criteria that allows them to halve their income taxes.

The measures mark the first concrete action being taken by China this year to boost its economy, and come after Premier Li Keqiang sought to reassure jittery markets that Beijing was ready to provide support.

Xinhua said that China's economy needed "a little stimulation but not a fully fledged stimulus".

"There is no need to panic, not least because China's growth rates remain high compared with the recent sluggish standards of Western nations," it added.

"The smart ones have got it. There is no sign of a monetary and fiscal policy shift."

The Chinese government said in March that it aims to grow the economy by around 7.5 percent this year, and a minority of analysts believe growth will ultimately fall short of 7.5 percent.

(Reporting by Ben Blanchard; Editing by Jacqueline Wong)

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