China rules out short-term stimulus despite weak trade figures

China will not resort to short-term stimulus measures in the face of temporary fluctuations in growth, Premier Li Keqiang pledged on Thursday, as monthly trade figures showed fresh signs of stress in the world's second-largest economy.

Chinese imports and exports in March both contracted compared with a year earlier, adding to concerns about the slowdown in an economy that has been the biggest contributor to global growth since the 2008 financial crisis.

In a speech to a forum on the tropical Chinese island of Hainan, Mr Li acknowledged some of the challenges facing the economy but insisted his government was capable of propping up growth while implementing difficult reforms to put it on a more sustainable base.

"The upturn of the Chinese economy is not yet on a solid footing, downward pressure still exists and difficulties in some fields must not be underestimated," Mr Li said. But "there are conditions in place for the Chinese economy to achieve sustained sound growth," he added. "We have the capabilities and confidence to keep the economy functioning within the proper range."

China is poised to publish first-quarter gross domestic product figures next Wednesday, and most economists forecast they will show a steep slowdown from 7.7 per cent growth in the fourth quarter of last year.

Most analysts now expect China to grow by about 7.4 per cent this year, the slowest pace since 1990, when the country was under international sanctions in the wake of the Tiananmen Square massacre.

On Thursday, Mr Li said the government's target of "about" 7.5 per cent GDP growth this year was flexible, and Beijing would not act to pump up growth as long as "there is fairly sufficient employment and no major fluctuations."

Since taking over the government last year, Mr Li's administration has downplayed traditional GDP targets, with job creation and reform of China's growth model at the top of the agenda.

In recent weeks, the government has announced a series of initiatives to boost infrastructure spending to prop up flagging growth but has refrained from the kind of massive stimulus it revealed in the wake of the global financial crisis.

"We will not resort to short-term stimulus policies just because of temporary economic fluctuations and we will pay more attention to sound development in the medium to long run," Mr Li said on Thursday.

Trade figures released on Thursday showed that Chinese exports fell 6.6 per cent in March from a year earlier, missing forecasts for a 4.9 per cent rise.

Imports fell even further, contracting 11.3 per cent from a year earlier and sending jitters through global equity and commodity markets.

In his speech, Premier Li championed the quick implementation of the Regional Comprehensive Economic Partnership as a way to boost growth in China and the broader region.

The RCEP is intended to create a trade zone extending from New Zealand to India and taking in China, Japan, Korea, Australia and the 10 Association of South East Asian Nation member countries.

Many see it as a competing initiative to the Trans-Pacific Partnership, which is being championed by the US and has effectively excluded China.

"As long as the TPP is conducive to the development of global trade and the fostering of an equitable and open trading environment, China is happy to see its conclusion," Mr Li said in what appeared to be a reference at the US-led initiative and China's exclusion from it.

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