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China's `new Normal' Growth Model Is Starting To Get Expensive  Enda Curran

823 words - 4 pages

China's `New Normal' Growth Model Is Starting to Get Expensive
 Enda Curran
September 10, 2015 — 12:01 PM EDT
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People walk past buildings in the central business district in Beijing on Sept. 9, 2015.
Photographer: Greg Baker/AFP/Getty Images)
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“Beijing has turned on the taps, lifting spending on everything from infrastru‎cture to public services,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. The nation’s authorities “cannot be accused of sitting idly by as growth decelerates, with measures announced year-to-date amounting to substantial policy support,” he said.

The world’s second-largest economy is growing at its slowest pace in 25 years, forcing the central bank to cut interest rates five times since November and funnel credit to local governments to finance new construction.
Estimates vary on the overall size of spending given the difficulty in netting out new expenditure and money that would have been spent anyway.
Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, expects the stimulus package to be as large as the one rolled out in 2009 and 2010, with fixed asset investment of up to 10 trillion yuan ($1.57 trillion) over the next two to three years.
Policy Support
The policy support is taking on many guises: The government has spent 1.5 trillion yuan trying to shore up slumping stock prices since a rout that began in June, according to Goldman Sachs Group Inc. That’s about half what the U.S. government spent on its financial crisis bailout program, the Troubled Asset Relief Program.
To fund infrastructure projects and create jobs, authorities in Beijing are planning at least 1 trillion yuan in bonds, and potentially a multiple of that. The central bank has also put $48 billion into China Development Bank Corp. and $45 billion into the Export-Import Bank of China as part of...

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