G20: China Abandons Role of Global Engine as Wen Tempers StimulusJune 17, 2012
Premier Wen Jiabao has an unspoken message to his Group of 20 counterparts in Mexico today: This time, don’t count on a growth bailout from China.
In the depths of the 2008 credit crunch, Wen’s 4 trillion yuan ($586 billion) fiscal injection over two years and 17.6 trillion yuan credit surge helped prop up the global economy. In China, it fueled a property bubble, stoked inflation and amassed bad debts that Fitch Ratings says weakened the banking system.
“The government is trying to strike a better balance between stabilizing growth in the short term and adjusting structure in the long term,” said Peng Wensheng, chief economist in Beijing at China International Capital Corp., who worked at the International Monetary Fund and Hong Kong’s central bank. Total stimulus this year may be less than one- third the size of the 5.4 trillion yuan fiscal and monetary firepower of 2009, Peng said.
Investment is more strategically focused than the efforts that year that helped cushion everyone from Australian iron-ore exporters to General Motors Co., which saw its Chinese sales soar 67 percent as it coped with bankruptcy at home. Of some 818 billion yuan in projects recently approved, 55 percent were for clean energy or subsidies for fuel-efficient cars, according to Australia and New Zealand Banking Group Ltd.