Thursday, February 02, 2012

What China will do next to try to shore up its ailing economy

Zhu Baoliang, chief economist at the State Information Centre, a government think-tank, has apparently signalled the probability that China will cut taxes and slash banks' reserve requirements to try to support slowing economic growth

As the regime is flush with cash (at least as far as we know), cutting taxes is a smart move.

However, reducing banks' reserve requirements is a palpably false move since there is already a lot of bad debt in the system, and such a move will make it worse - and thereby make Chinese banks even more vulnerable than they already are.

As growth declines to 8% or less, a lot more capital will flee China - making the situation even more difficult for China to handle. Sphere: Related Content

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