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 http://www.reuters.com/article/2012/02/02/us-china-economy-policy-idUSTRE8110NL20120202

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