FROM SCRATCH NEWSWIRE

SCAVENGING THE INTERNET

CHINA SAYS IT MIGHT WORK WITH IMF ON GLOBAL CRISIS

Posted by Gilmour Poincaree on November 15, 2008

Published: Nov 14, 2008 12:31 AM – Modified: Nov 14, 2008 04:52 AM

by Joe McDonald – AP Business Writer

BEIJING – China said Friday it could work with the International Monetary Fund to help countries hurt by the global financial crisis, suggesting it might heed appeals to contribute to a bailout fund.

As President Hu Jintao prepared for a Washington meeting of leaders to discuss a response to the crisis, Vice Finance Minister Yi Gang sounded constructive, saying China was prepared to work with other countries. But at the same time, Yi reiterated that the most important step Beijing can take will be to keep its own economy stable.

“We are positively taking part in rescue actions for this international financial crisis,” Yi said at a news conference. “There are many ways to do this. We can do it bilaterally, such as currency swaps. And we can do it multilaterally, such as taking part in activities on the platform of the IMF.”

Hu is expected to come under pressure at the weekend meeting to use China’s $2 trillion in reserves to help expand an IMF stability fund. Beijing has yet to respond directly to such suggestions but says Hu will press Western leaders to give developing countries a bigger role in such global financial institutions, a measure that analysts say might be a condition for a Chinese contribution.

Japanese Prime Minister Taro Aso said Friday that Japan is ready to lend up to $100 billion to the IMF to support nations reeling from the global financial crisis. The IMF has dipped into its reserves fund to provide emergency loans to Iceland, Hungary and Ukraine worth more than $30 billion.

Yi repeated Beijing’s insistence that keeping its economy growing will be an important contribution to global stability. China announced a nearly $600 billion package on Sunday to boost economic growth through higher spending on construction and social programs.

“We have worked to stabilize the growth of China’s economy. We believe this will be our biggest contribution to the international response to the financial crisis,” Yi said.

Also Friday, another official said weakness in China’s economy is worsening and the government faces a severe challenge as it tries to avert a sharp downturn.

“The downturn trend in our economy is more obvious, especially since September. We hope a rapid downturn in growth will not occur,” Mu Hong, a deputy chairman of the nation’s main planning agency, said at the news conference with Yi.

Mu expressed confidence the stimulus package would help the country weather the global downturn. But he said, “This international financial crisis is a new challenge for us. It is a severe challenge.”

Beijing is moving quickly to launch the package and will distribute most of a planned 100 billion yuan ($15 billion) in additional government spending within the next two weeks, Mu said. He said the money will be spent on housing, rural development, highways, public health and environmental protection.

The government says the total stimulus – which also calls for higher investment by state companies – will be worth 4 trillion yuan ($586 billion) over the next two years.

China’s economic growth fell to 9 percent in the latest quarter after a stunning 11.9 percent expansion last year. Exporters say foreign customers are canceling orders, which has led to layoffs and factory closures.

Mu blamed the weakness on the global downturn. But data released Friday showed domestic investment – a key force driving China’s rapid expansion – is also cooling as companies cut back or put off spending on real estate, factories and other assets.

Investment in assets grew by 27.2 percent in the first 10 months of this year over the same period of 2007, the National Bureau of Statistics reported. That was down from the 27.6 percent growth reported for the first nine months of the year. Such investment is estimated to account for one-third of China’s economic growth.

“China’s pace of economic growth will reflect the extent to which accelerated infrastructure spending will be able to offset a slowdown in the property and manufacturing sectors,” said a report by Jing Ulrich, JP Morgan Chase & Co.’s chairwoman for China equities.

“Further fiscal and monetary easing may be called for as growth moderates,” Ulrich said.

© Copyright 2008, The News & Observer Publishing Company

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PUBLISHED BY ‘THE NEWS & OBSERVER’

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