China Set to Pour Another 4 Trillion into Its Economy

China is launching another 4 trillion yuan stimulus.

From Bloomberg:

China will announce in August a new stimulus package of possibly 4 trillion yuan ($586 billion), the China Business newspaper reported on its Web site, citing unidentified sources.

The plan, from China’s National Development and Reform Commission, will likely cover nine industries including information technology and new energy, the report said.

http://www.bloomberg.com/apps/news?pid=20601089&sid=ajsv6gEJ15Nw

China is the world’s third largest economies. It is the largest creditor holding the U.S. debt, thereby having huge foreign reserves to draw from.

If its recovery is well under way, why they are propping up its economy through stimulus packages again?

Its yuan-USD peg might have been their strategic choice for survival, yet why the Chinese have fueled bubbles in the first place?

The answer to that question is complicated and requires the bigger picture to understand.

There seems to be two camps regarding the Chinese situation: Regardless of bubbles, its future growth will allow it to soak up some of the bubbles; Its economy is bound to crash somewhere down the line.

In any case, history has shown that the government’s intrusive meddling with markets doesn’t end well.