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China Sees Economic
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China served glum markets a dose of optimism on Friday, saying its economy was recovering and promising more swift action to absorb the shock of the global financial crisis and deepening recession in rich nations.
Top Chinese officials said substantial fiscal and monetary stimulus was breathing life back into the world's third-biggest economy hit by crumbling exports, suggesting Beijing saw no need to boost the existing investment plan of nearly $600 billion.
"The economic figures are stabilising and recovering, which demonstrates that the policies have begun to show an impact," central bank governor Zhou Xiaochuan told a news conference during the National People's Congress.
China's optimism was not expected to be shared by the world's largest economy later on Friday, with forecasters expecting grim numbers when the key US February payrolls report is released.
Zhou said China had learned the lesson from other countries that a sluggish response to the crisis delayed the restoration of confidence.
"We must err on the side of being quick and decisive."
Zhou was speaking a day after Premier Wen Jiabao said China would ramp up deficit spending this year to hit its target of 8 per cent growth, even though he failed to announce an increase to the two-year stimulus plan that financial markets had hoped for.
Beijing's quiet confidence stands in contrast with increasingly gloomy predictions for the United States, the euro zone, Japan, Britain and other industrial nations, all mired in the most severe downturns in decades.
A top International Monetary Fund official said the world's developed economies were suffering the deepest slump since World War Two and warned the downturn could last into next year.
"The emerging consensus is that it looks as if the downturn in the advanced economies will run through this year and into next year," IMF First Deputy Managing Director John Lipsky told the Daily Mail newspaper in an interview published on Friday.
Jeffrey Lacker, president of the Richmond Federal Reserve and a voting member of the Federal Open Market Committee, sought to dispel the gloom, saying the US economy may join China and start recovering before the end of this year.
Lacker told CNBC television that the plunge in discretionary spending may have run its course and could "give people some confidence that we've almost seen the worst of it".
But an onslaught of grim economic data and corporate reports was deepening market pessimism about the US biggest economy.
On Thursday, auditors for General Motors, once the world's top carmaker, voiced doubts whether it could survive without declaring bankruptcy, pushing its shares down more than 15 per cent and Wall Street stocks to 12-year lows.
Asian stocks also fell, unsettled by GM's troubles and lingering fears of more turmoil in the financial sector. Tokyo's Nikkei average closed down 3.5 per cent at a four-month low.
"I'm worried about America and the place where we can place our hopes now is China," said Yoku Ihara, manager at Retela Crea Securities.
Hopes that China may boost its stimulus plan sparked a brief rally in global stocks earlier this week.
But the latest assurances from Beijing and suggestions that they still had plenty of ammunition to support the economy failed to cheer up investors ahead of the US February payrolls report, the key gauge of the US economy's health.
Economists in a Reuters poll forecast that job losses likely jumped to 648,000 last month, driving the unemployment rate to a 25-year high of 7.9 per cent.
The report comes a day after the European Central Bank and the Bank of England slashed interest rates to record lows to arrest a deepening slide in the European economy.
The BoE also pledged 75 billion pounds ($106 billion) of newly created money to buy government bonds and pump funds into the struggling economy, embarking on an scheme known as quantitative easing.
Unprecedented in Britain, it was tried by Japan with limited success at the beginning of the decade.
In Japan, where the central bank has already driven interest rates close to zero, media reported that the authorities were considering tripling to $30 billion a scheme offering low-interest loans and cash injection to firms in trouble.