04.04.2014 18:31

Big Stimulus Once More?

China will not go on a another major spending spree, but it does need the right stimulus to cushion the downturn and hasten economic restructuring
By Andy Xie
 

The economic slowdown is an inevitable part of China's economic restructuring as it shifts away from bubble dependence. Any stimulus could be aimed to minimize collateral damage, not to reverse the trend by blowing up bubbles again. As China's leverage is over two times GDP and market sentiment is fragile, inflating a bubble again may spark mass selling rather than piling in. The consequence could be a speculative collapse rather than a revival.

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