Aug 27, 2012

The UK Telegraph just reported that various governments in China will spend approximately US1.27 Trillion to stimulate its slowing economy with various public projects. That’s one whopper of an amount of stimulus… China has an advantage over the U.S. in that they have the cash for such projects, while the U.S. would have to borrow to the hilt.

The article when on to describe the possibility of China’s economy “hitting a hard bottom” at “just” 7% of GDP growth, vs the 10% they’re used to.

The real risk here is one the Chinese government always has in the back of their mind, which is to maintain stability of their nation of 1.3 billion. If factories start slowing down to the point to where they have to lay off workers then millions of migrants would return to their homes in the center of the country. If these workers find work closer to home it will make it harder for the factories on the East Coast, where most of China’s industry lies, to find help once they get busy again.

Some a large amount of stimulus show the Chinese goverment has real concern about the direction of their economy. It will be interesting to see where they finish up this year.