China vowed on Thursday to ramp up spending and help exporters to hit its 8 percent growth target this year in a rare display of confidence in a world battling the worst financial crisis in 80 years.
Investors found some solace in Beijing's pledge to keep the world's third-largest economy in high gear as they braced for more cuts in euro zone and British interest rates that would further deplete central banks' conventional recession-fighting arsenal.
Premier Wen Jiabao said China's growth goal remained realistic, but did not give markets what they had craved for and announced no addition to Beijing's 4 trillion yuan ($585 billion) economic stimulus plan.
However, he told parliament public investment would double, while healthcare and social spending would also rise sharply, driving the budget deficit to almost 3 percent of national income from 0.4 percent in 2008.
That would still be just a quarter of the shortfall the United States is planning for this year, showing Beijing could dig deeper into its coffers if it proved necessary to offset the impact of a collapse in demand for its exports.
"Obviously they're looking at a global economy that every day gets worse, so they might have decided to keep the extra spending in their pockets," said Stephen Green, head of China research at Standard Chartered Bank in Shanghai.
Global stock markets rallied on Wednesday on hopes Beijing would expand its stimulus plan, but even without a top-up pledge for now, most Asian markets extend gains.
Tokyo shares closed up 2 percent with bets still on that Japanese machinery makers will get a sizeable slice of Beijing's investment bill.
Beyond China, investors had little to cheer about.
In Europe, the Bank of England and the European Central Banks, are expected to slash rates again to historic lows later on Thursday to shore up the UK and euro zone economies mired in deepening recessions.
Financial bookmakers forecast the major European share indexes would open down around 1 percent.
RATE CUTS, NEW MONEY
The BoE and ECB are seen cutting their benchmarks by half a percentage point to 0.5 percent and 1.5 percent respectively. In addition, the Bank of England is seen unveiling a scheme to create new money to buy assets such as government bonds and corporate debt in a process known as quantitative easing.
Markets also look to the ECB to indicate how far it is willing to go with cutting rates and what additional ways of reviving the euro zone economy it might consider.
"The question is what else they can do? They could buy paper on the market, they could intervene more on the money markets and there is talk about clearing houses for certain assets," said UBS economist Stephane Deo.
In Japan capital spending data suggested on Thursday the world's second-biggest economy may have suffered an even deeper contraction in the fourth quarter than the initially reported 3.3 percent slump.
There was also more evidence of deepening U.S. recession.
Wednesday's private sector jobs data suggested the government's more comprehensive payrolls report on Friday would show steepening job losses, while top Federal Reserve officials predicted further economic pain in the months ahead.
Dallas Federal Reserve Bank President Richard Fisher said the world's biggest economy may go through two years of contraction despite huge monetary and fiscal stimulus.
GLOBAL HEADWINDS
The corporate sector showed more signs of stress with shares of U.S. industrial bellwether General Electric Co hit by fears of a possible credit rating cut and Ford announcing plans to cut its $25.8 billion automotive debt.
With much of the developed world now in recession and evidence that Asia's third-biggest economy India was rapidly losing traction, markets' fading hopes for economic recovery later this year rested solely on China.
Wen acknowledged the challenge.
"Demand continues to shrink on international markets; the trend toward global deflation is obvious; and trade protectionism is resurging. The external economic environment has become more serious, and uncertainties have increased significantly."
But he said 8 percent growth, seen as necessary to create jobs and preserve social stability, was within reach.
"As long as we adopt the right policies and appropriate measures and implement them effectively, we will be able to achieve this target," he said.
