Yuan And H-Shares Keep Falling

China's Government Wants to 'Stabilize Growth'

Apparently China's government appears to be slightly alarmed at the recent slew of negative headlines and data releases and fears that its 'growth target' may not be met this year. By way of countering this threat, it evidently plans to resort to Keynesian deficit spending measures:

“China will speed up construction projects and other measures to support the economy after a slowdown in industrial-output and investment growth boosted risks of missing this year’s expansion target.

The nation will “seize the moment to roll out already-determined measures in expanding domestic demand and stabilizing growth,” the State Council, or cabinet, said in a statement last night after a meeting. China will “accelerate preliminary work and construction on key investment projects with timely assignment of budgeted funds,” it said.

The statement suggests the depth of the slowdown is testing Premier Li Keqiang’s tolerance for growth below what he says is a flexible target of “about” 7.5 percent. A gauge of Chinese companies listed in Hong Kong entered a bear market today, the yuan fell the most since 2008 and Goldman Sachs Group Inc. projected a 5 percent annualized pace of expansion this quarter.

“Against the background of increasing downward pressure on growth, the pro-growth signals from the meeting are very timely and necessary,” Xu Gao, chief economist with Everbright Securities Co. in Beijing, said in a note. “Measures to stabilize growth will materialize gradually to cause a modest acceleration in growth,” wrote Xu, who formerly worked at the World Bank.

Construction projects? Construction is the one thing China already has way too much of. Not only has residential housing and office space construction gone absolutely nuts over the past few years, but the boom was replicated in the infrastructure area as well.

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