China's stimulus will not prevent marked slowdown, says Moody's

SINGAPORE: The Chinese government's massive multi-year fiscal stimulus programme will only have limited effect as the country faces the prospect of a substantial slowdown in economic growth, said Moody's Investors Service.

Despite its four-trillion-yuan (RM2.1 trillion) size (equal to 15% of gross domestic product), the fiscal stimulus programme would not likely be able to offset the contraction in export growth from the unfolding global recession, nor would it be able to tackle the negative knock-on effects on the manufacturing sector, according to Moody's Global Sovereign China Report .

"Moody's baseline scenario, consistent with a tepid recovery from the global recession in late next year, is for real GDP growth to range between 7% and 8% in 2009, but then rebound to 8-9% in 2010," said Thomas Byrne, Moody's senior vice-president/sovereign regional credit officer for Asia and the Middle East, and author of the report.

"However, a more severe and protracted global recession could lower China's real GDP growth to the 5%-7% range in 2009 and 2010," he said. "Whichever scenario plays out, China's growth will decelerate sharply from the average annual rate of almost 11% in the past five years."