China’s Wen Jiabao Acknowledges There is Room for Further Stimulus

“Chinese Premier Wen Jiabao said the nation has room for fiscal and monetary measures to support growth and will meet this year’s economic goals, triggering gains in Asian stocks.

“Be it monetary or fiscal, we still have ample strength,” Wen said at the World Economic Forumin Tianjin yesterday. A fiscal stabilization fund of 100 billion yuan ($16 billion) is available for “preemptive” measures, he said.

Morgan Stanley today became at least the fifth bank to estimate that China’s economic growth this year will be 7.5 percent, the same as Wen’s target and the weakest pace in 22 years, afterimports slid in August and industrial production cooled. While the premier’s comments encouraged investors, the government may limit stimulus to restrain inflation and bad loans and avoid undoing a campaign to cool the housing market.

“The government has fiscal and monetary war chests to revive growth but there does not seem to be much appetite to roll out a large-scale stimulus package,” said Wang Qinwei, a London-based economist with Capital Economics Ltd. who previously worked at the People’s Bank of China.”

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