Thursday March 5, 08:15 AM
China confident of growth, US economy falters
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BEIJING (AFP) - A confident Chinese Premier Wen Jiabao said Thursday his country could still post eight percent economic growth in 2009 despite the global meltdown, as grim US data hinted at a prolonged recession.
Although Wen admitted the world's third biggest economy was struggling, and he did not unveil any new stimulus measures as expected, his growth forecast was well received on Asian markets, with Tokyo closing up 1.95 percent and Shanghai up 1.80 percent at midday.
Hong Kong's Hang Seng Index edged down 0.4 percent in morning trade on profit taking after Wall Street rallied Wednesday to close 2.23 percent higher.
Wen, speaking to lawmakers at the start of the annual parliamentary session, said China's export-driven economy would survive the crisis.
"We are fully confident that we will overcome difficulties and challenges, and we have the conditions and ability to do so," Wen said.
The premier said maintaining growth of about 8.0 percent was "essential for expanding employment for both urban and rural residents, increasing people's incomes and ensuring social stability."
Officials here are concerned that social unrest could spread in China's vast countryside, where 20 million rural migrants have lost their jobs in recent months as thousands of factories have been forced to shut their doors.
"As long as we adopt the right policies and appropriate measures, and implement them effectively, we will be able to achieve this target," Wen said.
Many of Asia's export-dependent economies have been hit especially hard by the worldwide financial meltdown, as consumer demand in the United States and Europe has evaporated.
Japan's Prime Minister Taro Aso said Thursday there was "no bottom in sight" for Asia's largest economy, which is deteriorating rapidly amid the global downturn.
The country has seen exports plunge by more than 45 percent and industrial output slashed by a record 10 percent in January, on Thursday released data showing companies are massively cutting investment to cope.
Investment in plants and equipment dropped by 17.3 percent in the three months to December from a year earlier, led by the country's struggling automakers and other manufacturers, the finance ministry said.
"The result confirmed that the Japanese economy is worsening rapidly and going though a very tough phase," a ministry official told reporters.
In South Korea -- where exports, which account for more than one-third of GDP, are down 34 percent -- the government promised bold steps to revive domestic demand and save jobs in an "all-out" bid to save the economy.
Finance Minister Yoon Jeung-Hyun, describing the global downturn as "unprecedentedly far-reaching and fast worsening," said Seoul would focus on developing its service industry to power growth.
The government would "make all-out efforts to preserve and create jobs" by expanding tax incentives to companies and first-time homebuyers, and granting businesses rollovers on outstanding loans, Yoon said.
South Korea's economy, Asia's fourth-largest, is on the edge of recession. It shrank 5.6 percent quarter-on-quarter in October-December, its worst showing since the Asian crisis of 1998.
Malaysia, also trying to stave off recession, put forth in parliament plans for a 10-billion-ringgit (2.69-billion-dollar) spending plan to boost the economy.
Bleak data from the US did little to bolster sentiment in Asia, with the Federal Reserve saying economic activity "deteriorated further" in February, citing weak consumer spending, tight credit and decreased factory output.
"Looking ahead, contacts from various districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010," it said in its Beige Book report.
The US economy shrank by a more-than-expected 6.2 percent in the fourth quarter, and some analysts say that figure could be even worse in the first quarter of this year.
The administration of US President Barack Obama on Wednesday unveiled a 75-billion-dollar plan to help millions of homeowners keep their houses, either through loan modifications or mortgage refinancing.
"It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets," Treasury Secretary Timothy Geithner said in a statement.
But the release of that plan came as a private sector survey showed 697,000 job losses in February, stoking fears of a particularly grim US jobs data report on Friday.
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