For all the talk of Beijing’s stimulus package, there had been few signs that efforts to boost the economy were having a real effect. Fiscal spending surged by 31% year-on-year in December, leading to a full-year fiscal deficit, but fourth-quarter GDP growth came in at just 6.8% year-on-year.
An indication of activity beyond government spending came with the release of bank lending figures for January. Helped along by policies encouraging looser credit, banks distributed as much as US$175 billion in new loans, a single-month record. Most of the lending went toward infrastructure, the main focus of government stimulus.
Infrastructure was not the only area attracting government attention, however. The State Council approved new stimulus plans for the textile and heavy machinery sectors, featuring higher export tax rebates for textiles and incentives for research and development.
The theme of using a range of tools to boost the economy was not restricted to fiscal measures. People’s Bank of China Governor Zhou Xiaochuan said the central bank would "choose tools according to our economic situation," and would not rely solely on interest rate changes.
While advocating flexibility, however, Zhou denied that China had adopted a new strategy in setting its exchange rate. His comments came after a Ministry of Finance report called for Beijing to "actively guide" the renminbi-US dollar exchange rate to about RMB6.93 to help manufacturers.
Zhou’s words may have been directed at US Treasury Secretary Timothy Geithner, who had suggested China may be unfairly manipulating its currency. Geithner later moderated his comments, saying the US would consider a broader global picture in its decision on currency manipulation.