China Mulls Fiscal Stimulus As Investment-Led Growth Tapers Off

Investors are trying to read the smoke signals from China’s leadership on its economic stimulus plans. In short, everyone is betting that Beijing will do something to revive growth in the face of grim global tidings and hiccuping industrial output. The question is to what extent would stimulus efforts retrace 2009’s investment-led boom that averted a recession but stoked inflation and piled up public debt. As world markets continue to take a beating, there is little doubt that China’s government is feeling the strain. Manufacturing output may have softened in May, according to HSBC’s latest snapshot survey. On Tuesday, the World Bank cut its growth forecast to 8.2%, blaming slack external demand and weakened real-estate spending. It said China had room to adjust fiscal policy and keep its economy humming. This chimes with a string of comments and reports in Chinese media that point to imminent government intervention. The State Council has called for proactive measures to ensure “stable and relatively fast growth”, adding to earlier comments by Premier Wen Jiabao that highlighted the economic hardship and suggested relief would follow.

http://www.forbes.com/sites/simonmontlake/2012/05/24/china-mulls-fiscal-stimulus-as-investment-led-growth-tapers-off/