China ponders need for a stimulus package

An investor watches her stocks at a securities exchange in Shanghai on August 22, 2012. Slowing growth is leading the government to consider further measures to boost the economy, but some say once home prices pick up, spending will follow.

There's word this week from China that a lot of new infrastructure spending could be in the works, on everything from railroads to health care. The Chinese government is trying desperately to kickstart the economy, which has been slowing down for almost two years. There’s been a lot of talk in Beijing, but no action. So far, China’s government’s taking the stance that no stimulus may be the best stimulus.

Andy Rothman is a Shanghai-based economist and says, "The leadership transition is coming up sometime in the fall. Any kind of stimulus takes a fair amount of time to kick in. If the party leadership felt a hard landing was on the horizon, I think they would’ve already reacted." He’s confident China’s plan to maintain public infrastructure funding and to relax restrictions on the housing market will soon increase growth.

But that doesn’t mean China will return to its glory days. "The decade of double-digit GDP growth is gone. And we’re also, in particular, looking at a lot slower construction activity."

Not to mention tough times for anyone exporting to the EU or the U.S. Still, says Rothman, as home sales pick up again in China, so, too, will consumption of U.S.-brand cars, phones and clothes.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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