In a two-hour speech outlining his “work report” to the National People's Congress, China's parliament, Mr Wen said the global financial crisis was deepening but the goal of 8 per cent growth was still realistic.
“The global financial crisis continues to spread and get worse. Demand continues to shrink on international markets; the trend toward global deflation is obvious; and trade protectionism is resurging,” he said.
But “as long as we adopt the right policies and appropriate measures and implement them effectively, we will be able to achieve this target”, he added.
Global financial markets rose on Wednesday after Chinese officials indicated Mr Wen would introduce a new stimulus plan in his speech. However, Mr Wen did not announce additional measures beyond the Rmb4,000bn ($585bn) “investment plan” unveiled in November.
He provided few extra details to help clarify how much of that investment would be genuinely new spending, and where the money would be allocated.
Mr Wen said China would run a budget deficit this year of Rmb950bn, equivalent to nearly 3 per cent of GDP – a record in recent times for China, but modest compared to some of the fiscal packages currently being considered around the world.
Indeed, for all the talk about China's big fiscal plans for 2009, the 21 per cent increase in total government expenditures for this year is slower than the 25.4 per cent rise last year.
In spite of the lack of new investment plans, the Shanghai market rose another 1 per cent yesterday as investors were assured by Mr Wen's forecast. “We see a firm tone to Mr Wen's speech that the government is determined and able to cope with the crisis,” said Sun Mingchun at Nomura International.
Economists said China's relatively low debt levels meant the government could expand its fiscal stimulus over the course of the year if there were few signs of recovery.
Jia Kang, researcher at the Ministry of Finance, also hinted at measures to come. “China may have to widen the fiscal deficit further if the economic situation continues to be weak in the second quarter,” he told reporters.
