'Stimulus' may not be all it seems
The key player in any stimulus is China's banking sector. Photo: Reuters
WILL China play the role of white knight to Australia's distressed iron ore miners?
Investors have seized on the news that China's economic planning agency has approved scores of big infrastructure projects as a sign that Beijing is about to unleash another round of stimulus.
But in China, opinion is divided on whether a new round of stimulus is desirable or even affordable given many local governments are still nursing debt hangovers from a 2009 spending spree.
The key player in any stimulus package is China's banking sector. The last round of 4 trillion yuan ($A600 billion) spending was largely financed by Chinese banks and fiscal spending was only one quarter of the total package.
Chinese banks are reluctant to indulge in a new round of credit expansion without an explicit mandate from Beijing. The chief executive of one of China's largest banks expressed his reservation about ''irresponsible credit expansion''.
Local officials from Changsha, an industrial city in central China, which is famous for its outlandish 800 billion yuan ($A120 billion) stimulus package, reportedly told Chinese media that it was finding it difficult to get loans from banks.
Credit Suisse bankers warn many stimulus announcements have been released without many details, especially crucial details on funding sources, so these are not stimulus spending ''strictly speaking''.
One Chinese policy adviser said the government would not act unless there was a massive unemployment problem.