Stimulus policies may hurt China economy: Experts

May 31st, 2012 - 3:08 pm ICT by IANS  

Beijing, May 31 (IANS) A stimulus policy only to promote investments will be “dangerous” for a weakening Chinese economy as the excess production capacity may result in more serious economic fluctuations, experts have warned.

The government’s recent stimulus policies have raised economists’ worries about a repeat of the side-effects brought by the four trillion yuan ($630 billion) stimulus package in 2008, The China Daily reported Thursday.

“The key problem for Chinese companies is the overly competitive environment, thanks to excess production capacity, rather than a lack of capital,” said Pan Jiancheng, deputy director-general of the economic monitoring centre of the National Bureau of Statistics.

“A rough expansion of investment may offer temporary relief, but it could result in disasters in the future,” Pan said.

The deepening eurozone crisis and worse-than-expected industrial production indicators have lowered many economists’ predictions about the growth rate in the second quarter.

Liu Ligang, head of China economics at Australia and New Zealand Banking Group Ltd., forecast that the manufacturing purchasing managers’ index, an indicator of the operating conditions of the sector, is likely to drop to 51.1 in May from 53.1 in April.

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