When the economic crisis hit, Beijing moved quickly to respond with a very strong stimulus plan. Replacing the booming export business that was suddenly grinding to a halt was going to be difficult but the stimulus did help shift spending for internal projects. The theory was to keep the economy moving while the West had time to regroup and start purchasing again. The purchasing may not have recovered (and won't anytime soon) and now the initial stimulus is starting to wear off. The reality of frugal Western shoppers is setting in so China now plans to keep a soft touch on the banks so they can keep the cash moving. Hmmm, I think we know how this story goes. Reuters:
Investors in China led the selling across Asia Tuesday, with concerns about more speed bumps for the economy pushing bank shares lower. Most major indexes across the region were also in the red.It will be interesting to see how this plays out over time. When the money stops moving in China - all bubbles come to an end, after all - what happens to this regime?
The Shanghai Composite Index sold off sharply, led by banking stocks, after Premier Wen Jiabao said China would keep its monetary policy loose as the economy faces new difficulties, including trouble boosting domestic consumption.
In a downbeat statement published after the market closed on Monday, Wen said Beijing would ensure a sustainable flow of credit and a reasonably sufficient provision of liquidity to support growth.
