China’s incoming leaders will likely focus on economic reforms and avoid the bazooka-style fiscal stimulus used to ward off slowdowns in the past, analysts say.
Société Générale economist Yao Wei in Hong Kong said perceptions about big infrastructure-focused stimulus packages, such as the one unveiled in 2008, have shifted recently, with many in Beijing now of the view that “it’s dangerous to do more than they [central government] should.”
China is set for a once-in-a-decade change of its most senior leaders, with new faces expected to take the helm of the Communist Party this year and formally take the top ranks of government early next year.
“The signs I’ve seen so far seem to suggest that the new leaders are pro-reform and more comfortable with slow growth than the current ones,” Yao said.
Concerns over the public backlash against wasteful government projects, including some apparently ill-conceived projects funded by the government’s prior stimulus package, could be another reason officials are adopting a different tone about the need for more stimulus.
These concerns were back in focus last week after a section of an elevated concrete roadway collapsed in the northern Chinese city of Harbin, resulting in several deaths, and fueling doubts about the construction quality and engineering of the newly opened transport link.
The incident also brought back memories of last year’s fatal high-speed rail collision near the coastal city of Wenzhou, which left 35 dead, sparking fierce online criticism of the bureaucracy that oversees the rail network.
In what may be a move to show that the government is not banking on infrastructure spending this time, officials in the last few months have been relatively sanguine about the slowdown, Yao said.
“Given the track record, the government should have done more, but this time the government is doing something different,” Yao said.
Underscoring the confusion surrounding China’s policy at the moment, Bank of America Merrill Lynch said it had to assure investors China hadn’t in fact unveiled a 10 trillion yuan ($1.57 trillion) stimulus package — as was reported by the U.K.’s Telegraph newspaper earlier this week.
It said the report appeared to have confused figures relating to long-term strategic plans of various Chinese governments with short-term stimulus.
Of the 2.4 trillion yuan the U.K. newspaper said was going to energy-related projects, for example, much of this was actually a goal in government’s the upcoming Five-Year Plan, Merrill said, with plans for the actual government outlay closer to 200 billion yuan.
“There is definitely no major stimulus package announced so far. ... The chance that China will announce a massive stimulus package is quite small in the near term, barring another global financial crisis,” Merrill said.
However, Merrill also noted the lack of government action in response to the slowdown and even wondered if tensions related the leadership transition had led to “policy paralysis” in July and August.
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China’s incoming leaders will likely focus on economic reforms and avoid the bazooka-style fiscal stimulus used to ward off slowdowns in the past, analysts say. 
