Last night's devastating trade data from China had the bad-news-is-good-news crowd chomping at the bit over the next massive stimulus that 'surely China will unleash...because they've got so much in reserves'. However, as we have explained previously, Chinese premier Li Keqiang destroyed those expectations last night when he ruled out major stimulus to fight short-term dips in growth. Unlike his 'desperate for a short-term fix' colleagues in the west, Li stated more thoughtfully (and perhaps more knowingly given his country's pending credit bubble crash), "we will instead focus more on medium- to long-term healthy development."
As Reuters reports, even as big falls in imports and exports data reinforced forecasts that the world's second-largest economy has slowed notably at the start of 2014, Chinese Premier Li Keqiang ruled out major stimulus to fight short-term dips in growth.
Li stressed on Thursday that job creation was the government' policy priority, telling an investment forum on the southern island of Hainan that it did not matter if growth came in a little below the official target of 7.5 percent.
"We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures," Li said in a speech.
"We will instead focus more on medium- to long-term healthy development."
His comments are among the clearest yet on the government's plans for the economy, which has rattled global investors this year with a surprisingly lackluster performance.
Of course hope spring eternal among the stimulate-or-die, band-aids forever strategist crowd...
The almost unabated run of disappointing data this year has fuelled investor speculation the government would loosen fiscal or monetary policy more dramatically to shore up activity.
This kind of collapse in data would be a huge buying signal for Western stocks...
But authorities so far have resisted broad stimulus measures. On Wednesday, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks. And now Premier Li's more blunt words should make it clear that global investors riding the wave of moar free money to China's shores should look elsewhere.