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BEIJING - A flurry of visits by Chinese leaders to cities hit by sluggish exports and a reported tax rebate for textile exporters are being interpreted by the market as signals that Beijing might cautiously ease tight economic policies.
The official China Securities Journal said on Wednesday that China will soon agree to raise tax rebates on exports of textile products and garments as it faces a narrowing trade surplus.
That would mark something of a turnaround from China's progressive lowering of tax rebates in recent years as it has tried to tilt the economy away from low-value manufacturing and reduce its reliance on exports.
The newspaper report followed separate visits this past week to key exporting centers on the eastern coast by Premier Wen Jiabao, Vice Premiers Wang Qishan and Li Keqiang, and Commerce Minister Chen Deming. At every stop along the way, these economic leaders voiced their concern about the deteriorating business conditions faced by exporters as the world economy slows.
"This (textile rebate), plus Premier Wen Jiabao's emphasis on steady economic growth during the visits to major exporting provinces, sent us a strong signal that the tight economic policies would be relaxed to some extent," Zhu Jianfang, chief economist of CITIC Securities in Beijing.
Expectations of a friendlier policy environment have also helped the stock market. The benchmark Shanghai Composite Index has gained almost 10 percent so far this week.
Zhu said the government had many options if it wanted to ease. It could relax restrictions on bank lending, increase export tax rebates on a range of products or slow the pace of yuan appreciation.
The market has been rife with talk about a meeting of the State Council, or the cabinet, held on Tuesday, where key government agencies discussed the economy. Investors were waiting to see what conclusions policy makers had drawn.
"Even though the authorities might not explicitly use the term 'relaxing', it's quite likely that they will loosen their grip in quite a lot of sectors," Zhu added.
Premier Wen, in a weekend visit to Shanghai and Jiangsu province, outlined several major tasks for the government, saying the it would "control the focus, pace and force of macro controls and maintain long-term, sound and fairly fast economic growth."
Analysts have commented that the wording was quite different from statements heard in the first half of this year, when Wen stressed the need to control prices and cool the economy.
China's annual consumer inflation fell to 7.1 percent in June, according to sources, well down from a 12-year high of 8.7 percent in February.
Eyes will be on the the second-quarter GDP figure, due to be released next week, to gauge just how much the economy has slowed. Annual economic growth fell to 10.6 percent in the first three months from 11.9 percent in 2007.
Analysts polled by Reuters forecast that growth dipped just slightly in the second quarter, to 10.4 percent -- not so slow as to prompt a full-blown relaxation of economy policy, they said.
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