China has stimulus ammunition, says S&P
Ratings agency says high savings rate means there is plenty to support government spending
Beijing still has plenty of ammunition for stimulus measures, but some companies and banks face considerable risks, according to recent reports by ratings agency Standard & Poor's.
"China has plenty of powder left in its stimulus keg," one report by Tan Kim Eng, a senior director, said.
"Some observers argue the damage of the last economic stimuli had saturated the banks with credit risk and exhausted local governments' ability to finance large projects. Standard & Poor's Ratings Services thinks this is unlikely."
The mainland had a big financial cushion, owing to its high savings rate, Tan said, adding that the central government could support local government and there remained much demand for infrastructure.
However, inefficient infrastructure spending could lower GDP growth and hurt the government's efforts to rebalance the economy because stimulatory spending would expand the state sector and reduce domestic consumption, Tan said.
Another S&P report, by Liao Qiang and Ryan Tsang, warned the government's 4 trillion yuan (HK$4.97 trillion) stimulus from 2008 to 2010 had hurt the mainland banks' balance sheets, and the damage was about to surface.