Reuters: US Dollar Report: TEXT-S&P Says China Could Afford Another Big Stimulus

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TEXT-S&P Says China Could Afford Another Big Stimulus Aug 22nd 2012, 02:59 Tue Aug 21, 2012 10:59pm EDT SINGAPORE (Standard & Poor's) Aug. 22, 2012--China hasn't introduced another large stimulus program this year despite growing economic tensions, but it remains an option if conditions sharply deteriorate. That's according to a report that Standard & Poor's Ratings Services released today, titled "China Has Plenty Of Powder Left In Its Stimulus Keg." "The government retains significant capacity to support economic growth, if needed, partly because of China's sizable financial assets," said Standard & Poor's credit analyst Kim Eng Tan. Standard & Poor's says the government may be prepared to pump money into the economy if the currently stable unemployment rate rises steeply. In such a scenario, the cost of losing more inflation credibility would likely be a secondary consideration in a period of top leadership changes. Even in a country fabled for far-sighted policymakers, near-term social stability is valued much more than long-term policy credibility. "We still expect real economic growth of 8.2% in 2013. But in 2012, growth could slow to about 8%, compared with average growth of 9.6% for the past few years," said Mr. Tan. The report addresses the reasons why some observers believe China doesn't have the capacity to begin a new round of economic stimuli. It also highlights the likely inefficiencies of such a program and inflationary expectations. Link this Share this Digg this Email Reprints

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