China pledges stable growth amid overcapacity worries

Updated at 12.26pm:
China planned to control investment and promote growth in domestic demand next year, state media reported on Friday, following an annual economic meeting of top Communist Party leaders.

The reports provided scant policy details from the three-day conference, which ended on Thursday in Beijing. However, they signaled plans to continue monetary and fiscal policies already in place.

The meeting came amid mounting worries over overcapacity in various industries, such as autos, steel and aluminium manufacturing. A survey released this week by NTC Economics and CLSA Asia-Pacific Markets showed a slight deterioration in the Chinese manufacturing outlook.

The CLSA China PMI, or "purchasing managers index", was 49.8 in November, the first time it dropped to less than 50 since the survey was launched nearly two years earlier, CLSA said.

Chinese leaders have repeatedly pledged to expand domestic demand, mainly in the vast and underdeveloped countryside where most of the country's 1.3 billion people live.

But lagging incomes have hindered growth in consumption. Much of the country's recent 9 per cent plus annual economic growth has instead been fuelled by foreign investment and strong export growth, contributing to a soaring trade surplus that is generating friction with the United States and some other trading partners.

"Efforts toward expanding domestic demand are key to realising steady and relatively rapid economic growth," the official Xinhua News Agency reported.

Despite China's ascent as a world trading power and its transition to a "market" economy, the annual economic meeting carries trappings of the planned economy days.

A poster-style release on Xinhua's website showed a worker standing in front of a construction crane. Above its list of eight "demands" for next year, the introduction began with "According to Deng Xiaoping's theory", a reference to the revolutionary veteran, who died in 1997, credited with launching reforms two decades earlier.

After its top priority of keeping growth stable and balanced came a pledge to promote growth in rural areas, followed by improved conservation of energy and other resources and environmental protection.

The government also pledged to improve the trade imbalance, a growing concern with the country's trade surplus expected to hit US$100 billion (HK$780 billion) this year.

The reports did not cite a projected economic growth target for next year. Many economists, and the World Bank, have issued growth forecasts of well over 8 per cent despite expectations of a slowdown.

The report also said China would keep a stable foreign exchange policy, another bone of contention among trading partners such as the US that are urging Beijing to move more quickly in loosening currency controls.

The reports also noted calls for continued efforts to prevent the spread of bird flu - a major source of uncertainty given fears the disease could mutate into a form that could spread easily among humans.