China won’t pull back on stimulus

Marketplace Staff May 31, 2010
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China won’t pull back on stimulus

Marketplace Staff May 31, 2010
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Chinese officials say an Asian slowdown could send the entire world back into recession.

by Bill Marcus

Chinese Premier Wen Jiabao told Japanese business leaders the worries of a double-dip recession mean it’s too early for China to pull back on its half-a-trillion dollar stimulus package. “There cannot be the least relaxation.”

CLSA analyst Andy Rothman says continued Chinese stimulus would be a reversal, as China has been pulling back on its spending since last summer. [Wen] has got a message for people in Europe and the United States: Don’t start celebrating too soon that the economy is back on sound footing and withdraw your stimulus.”

Premier Wen also added that massive government spending around the world could prevent a full recovery, and China’s been urging the U.S. to trim back it’s debt. But he avoided talking about adjusting China’s currency against the dollar, which Rothman says he expects that to happen soon too.

ECB under fire

Meanwhile, Europe’s central bank is accused of a dangerous response to the debt troubles in the Eurozone. Germany in particular is taking heat for its decision to buy the bonds of Eurozone governments to stop sovereign debt.

ECB has started buying Greek and Portguese bonds of to keep the Eurozone government bond market open, which the bank says is important to maintain. Germans fear the ECB move is inflationary and the bank risks losing its independence, according to Marketplace’s Stephen Beard.

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