Why China’s growth rebound will falter

Overview

China’s huge monetary and fiscal stimulus will boost growth later this year, but this rebound will not be sustainable. We expect quarterly growth to move up into the 8-9 per cent range later this year. However, early in 2010 growth will likely fall below the 8 per cent level because new domestic demand drivers have not been developed to take over when the spending stimulus reaches a plateau next year. As a result, growth will trace a “W-shaped” trajectory rather than a “V-shaped”...