Following a string of dismal data releases for April, Premier Wen Jiabao on Sunday proclaimed that 'more priority should be given to maintaining stable economic growth'. Not before time, believe many investors, who now hope that Beijing stands ready to unleash a new stimulus programme to support China's ailing growth rate. Their conviction that some form of stimulus is needed is understandable. A quick look at the figures for last month shows that growth is weakening throughout the economy. Industrial production growth slowed. Electricity output was flat. Cement production barely rose. At the same time fixed-asset investment slumped to its lowest growth rate in years, while retail sales growth slackened. Car sales stalled. Abroad, China's export growth weakened, while - even more ominously - import growth dropped to just 0.3 per cent, its lowest, barring Lunar New Year distortions, since 2009. Meanwhile property prices continued to decline, while April loan growth fell to its lowest level for three years. To be fair, there are a couple of reasons why analysts expected April's data to be weak. For one thing, China's number crunchers have changed the way they collect the data, requiring industrial companies to report directly to Beijing, rather than via their local governments, which in the past have tended to inflate the figures. In addition, there were fewer working days in April this year than last. But even allowing for these glitches, wherever you look, activity is weakening. As a result, private sector economists are scrambling to revise down their growth forecasts for the year. Analysts at Goldman Sachs, for example, now expect gross domestic product to expand 8.1 per cent this year, the lowest growth rate since 1999. About the only signal you could interpret as encouraging was a fall in April's consumer inflation rate to 3.4 per cent, from 3.6 per cent in March. But even that may not be quite the positive signal it seems. Analysts at independent consultancy Lombard Street Research point out that consumer spending makes up just 33 per cent of China's GDP. Looking on a whole-economy basis, they reckon China has now slipped into deflation. As a result, Wen's pledge to support growth seems like good news. Unfortunately, opening the stimulus taps is not as simple as it sounds. On Sunday, Wen said Beijing would implement 'a proactive fiscal policy'. That chimes with the expectations of many analysts, who have been looking for the government to cut taxes this year in a bid to spur growth. Unfortunately tax cuts take time to feed through to growth, especially when consumer and business sentiment is weakening. Alternatively, Beijing could boost direct spending. But that too is tricky. Firstly, the slowdown in growth has hit the government's revenues, meaning any spending boost would entail an increase in government debts, which many analysts believe are already much higher than official figures imply. Secondly, there are doubts about the quality of growth that can be procured by jacking up spending, especially given the government's tendency to direct investment into grandiose infrastructure projects with questionable economic value. On the other hand, Beijing could attempt to stimulate growth by relaxing monetary policy. The central bank has already moved in this direction, reducing the proportion of deposits that banks are required to set aside as reserves, which in theory should free money for lending. But simply reducing reserve requirements will not be enough to stimulate growth. The trouble - illustrated by media reports that new lending was practically zero during the first two weeks of May - is that demand to borrow is weak. That shouldn't be too surprising. With Beijing insisting it will maintain its restrictions on real estate lending - 'We must never allow property controls to suffer a setback,' declared Wen on Sunday - lending to finance property investments remains depressed. Meanwhile, with the average interest rate on bank loans around 8 per cent, or roughly the same as China's expected growth rate for the year, borrowers are finding it increasingly difficult to generate a return on investments funded with bank loans. This leaves Beijing with two stimulus options. The government can either slash interest rates, or it can simply order the banks to ramp up lending to the state sector, much as it did in 2009. Both courses involve significant dangers. Either could risk reigniting inflation, while both would exacerbate China's investment bubble, postponing economic rebalancing and increasing the chance of a bad-loan crisis in the future. As a result, despite what Wen said on Sunday, the best option in the long run may well be for Beijing to hold back on the stimulus and let the slowdown take its course. Just don't expect investors to agree.