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Spend more on social causes, says ADB official

By Zheng Lifei (China Daily)
Updated: 2009-04-17 07:59

China should spend more on social causes and less on infrastructure if it plans to introduce another fiscal stimulus package to spur the economy, a senior Asian Development Bank (ADB) official suggested yesterday.

"The (Chinese) government should focus more on spending that will benefit the low-income families and less on infrastructure if there is another large fiscal stimulus package," said Lawrence Greenwood, vice-president, ADB.

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Social spending, Greenwood said, would have a long-term impact in terms of stimulating domestic consumption as it will reduce people's precautionary savings on items such as education and medical care.

Such spending, therefore, would help spur domestic demand more effectively in export-dependant countries like China that are trying to boost domestic consumption, Greenwood said.

Spending on education, to raise the labor skills and productivity, is also important for economic growth, he said.

The spectacular economic growth China achieved in the past few years, Greenwood said, is largely due to the increased productivity in the country.

"This has been achieved by moving hundreds of millions of farmers into industries, but such days are gone now," Greenwood said.

Education and more labor mobility would increase productivity, he said.

The Chinese government should also give more support to small- and medium-sized enterprises (SMEs), open up more industries and sectors and also create more jobs, he said, citing the examples of utility, air services and retail sectors.

The ADB Vice-President, who once served as secretary of the bureau of Economic and Business Affairs at the US State Department, said it was not necessary for China to introduce more stimulus packages for the time being.

"Continued robust implementation of the 4-trillion yuan economic stimulus package" should be the focus at this stage, as the huge economic boost measures have started to show initial results, Greenwood said, referring to China's 6.1 percent GDP growth in the first quarter.

"The economy is slightly better than we expected and there are small signs that the economy is recovering," Greenwood said, pointing to the robust retail sales and strong fixed asset investment growth.

The slightly better than expected economy could give the country "breathing space" to fine-tune its policy and transform its economic structure, he said.

"But the country still faces challenges such as falling exports and the major worry is on whether the momentum can be sustained," Greenwood said.