SHOWS: HONG KONG, CHINA (JANUARY 8, 2012) (REUTERS - ACCESS ALL)

JIANGUANG SHEN, CHIEF ECONOMIST, MIZUHO SECURITIES ASIA LIMITED

1. REPORTER OFF CAMERA SAYING:

'You believe the fiscal policy will be a lot more expansionary in 2013. What impact will this have on the modest growth rebound that you are seeing now in China?'

2. JIANGUANG SHEN, SAYING:

'I think it's very necessary. Without the expansionary fiscal policy, we probably will see a continued deceleration of the economy. So I think this expansionary fiscal policy can compensate for the decline in exports, also the weak manufacturing sector. So that fiscal expansionary policy which actually focus on 2 areas: one is infrastructure investment, second is to transfer income to low-income families to boost consumption or increase welfare expenditure. So that's 2 area. So that's needed to actually help the transition from the export-led growth model to a domestic demand-driven model. So that's why I think the fiscal policy need to play a more active role.'

3. REPORTER OFF CAMERA SAYING:

'A more active role this year than in 2012 - so what sort of measures are we going to see?'

4. JIANGUANG SHEN, SAYING:

'Yeah, I'm seeing still very slow growth in export sector, like my focus is something around 2%. I don't think to reach 5%. Given this positive export price, the real export, excluding the price effect, probably will be just zero. So I think that is a fact that China need to cope with more challenging external environment, a weaker external demand. So that's why I think not only this year we will see more accommodative fiscal policy but also regarding monetary policy, I think it probably will be less tight than last year.'

5. REPORTER OFF CAMERA SAYING:

'More eco data out on China - trade and inflation on Friday, GDP is also coming out next week. How will these data influence monetary policy?'

6. JIANGUANG SHEN, SAYING:

'I think interest rate cut is still unlikely because originally the deported rates in Chinese deport benchmark, 1 year is only 3%. This year inflation will be roughly the same, like 3%. So I see the room to cut interest rate is very small. Also the lending rate, they already last year allow banks to charge 30% lower than the benchmark. It's a de facto interest rate cut already for the lending side. So that's why I don't think there is a interest rate cut, but that does not mean there is no monetary easing because what they can do is to increase the liquidity in the banking sector by cutting Triple R much more aggressively. It's still at current level 20.5, it's still way too high. So I think there is still much room to cut the Triple R for this year to increase liquidity. I think that's the main focus of the monetary policy. Of course the same time, they will also continue to encourage total social financing. It means that other type of financing like bond insurance to help companies to gain capital to invest.'