Economists with Chinese government think tanks have rubbished JPMorgan Chase's claim that the Chinese government plans a multi-billion yuan intervention to boost the economy.
"Never heard of it", the economists were reported as saying by the Shanghai-based National Business Daily on Thursday.
Jia Kang, head of the research institute of the Ministry of Finance and Jin Dongsheng, deputy director of the research institute of State Administration of Taxation said they did not know anything about the plan.
Frank Gong, chief economist with JPMorgan Chase, said on Tuesday in a report that the Chinese leadership was considering a stimulus plan of 200 billion yuan to 400 billion yuan (US$29.2 billion to US$58.4 billion). The plan would embrace tax cuts and measures to boost capital and real estate markets, he claimed.
On Wednesday stocks jumped more than 7 percent, recording their largest one-day gain in four months. Some attributed the surge partly to the talks about economic stimulus package.
Economists cast doubts on Gong's judgment.
Zuo Xiaolei, chief economist with Galaxy Securities, defined the speculation as "nonsense" and said the talk was possibly based on the government increasing the 2008 credit quota by 5 percent for nationwide commercial banks, and 10 percent for local commercial banks earlier this month, which aimed at easing the financing difficulties of small- and medium-size enterprises.
Business insiders have already worked out the budget for this policy to be 200 billion yuan, according to Zuo Xiaolei.
Chen Daofu, an official with the Development Research Center of the State Council said the government needed legal basis and procedures to spend such a huge amount of money, but he did not deny the possibilities.
"The Chinese economy is not at stake, so I don't think it's necessary to adopt a fiscal stimulus package. Leading commercial banks still posted solid earnings in the first half of the year", said Huo Deming, an economics professor at Peking University.
However, no official comment from the government is available.
On Thursday, the benchmark Shanghai Composite Index dropped 3.63 percent on no follow-ups for the market-boost talks and on demand for profit taking.
(Xinhua News Agency August 22, 2008)