Fearing slowdown, China could veer into overheating
The only thing to fear in the slowing Chinese economy may be excessive fear of a slowdown itself.
Some worrying is warranted. But rushing into a fiscal stimulus, a hot topic of late, could make the economy a bubbling cauldron of unstable growth and inflation, its biggest problems just a few months ago.
“It’s very easy for them to relax policy more than they should,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. “All of a sudden you could see a return of overheating risks.”
China’s economy has decelerated markedly, the latest evidence coming this week in surveys that showed its manufacturing sector was shrinking for the first time in three years.
Disruptions from the Olympics, when scores of factories were shuttered to clean the air, likely exaggerated the slump but the trend of a slowing economy is clear enough payday advance lenders. China’s annual growth was 10.1 percent in the second quarter, well off last year’s scorching 11.9 percent pace.
That has prompted calls for government spending to prop up momentum. Speculation has run high that Beijing might craft a hefty stimulus package, with Chinese media reports talking about plans for tax cuts, academics recommending pump-priming and exporters pleading for support.
Resisting such appeals is made difficult by the fact that China could easily afford a cash splurge.
The overall national budget turned to a surplus of 173.9 billion yuan, or 0.7 percent of GDP, last year. Total government revenue grew 30.5 percent from a year earlier in the first seven months of 2008, outpacing expenditure.