Signs Of China’s Growth Slump Ending, And Stimulus 2

More signs of economic spring–or at least the ending of winter– and that last November’s 4 trillion yuan stimulus package is having some effect. The Purchasing Managers Index, a benchmark of manufacturing activity, rose for the third consecutive month in February, though at 49 it is still below the 50 score that marks the difference between contraction and expansion. But it is well above the 38.8 recorded in November and new orders rose for the first time in five months.

Prime Minister Wen Jiabao is widely expected to announce a top-up to the stimulus package when he addresses the National People’s Congress. That top-up may well amount to more than the original package, according to some private economists, though we’ll have to read the small print carefully to see how much is genuine new money, how much is repackaging of old and how much is government-sponsorship of infrastructure projects that will need private or provincial money to break ground. That speaks to the reality that while short term stimulus to the domestic economy can help its slowdown bottom out, whether the 8% target expansion rate for the economy can be hit for the year still depends on recoveries in the markets for China’s exports.

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