S&P : China Can Afford Another Big Stimulus
08/21/2012| 11:48pm US/Eastern
BEIJING--China has the option of launching another large stimulus program if economic conditions deteriorate sharply this year, a report by Standard & Poor's Ratings Services said Wednesday.
"The government retains significant capacity to support economic growth, if needed, partly because of China's sizable financial assets," the rating firm's credit analyst Kim Eng Tan said in a statement.
So far China has been cautious in its efforts to support the economy, fearing side effects similar to that of its last major stimulus in 2009 and 2010, such as surging inflation and concerns over the quality of bank loans.
S&P said the government may be prepared to pump money into the economy if unemployment starts rising sharply.
"In such a scenario, the cost of losing more inflation credibility would likely be a secondary consideration in a period of top leadership changes," it said.
"Even in a country fabled for far-sighted policymakers, near-term social stability is valued much more than long-term policy credibility," the rating firm added.
China's top leadership transition is expected to take place in late autumn this year, although the exact date hasn't been announced. Analysts believe the Chinese authorities will be especially keen to keep growth stable during this politically sensitive time.
"We still expect real economic growth of 8.2% in 2013. But in 2012, growth could slow to about 8%, compared with average growth of 9.6% for the past few years," said Mr. Tan.
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