AFTER A raft of downbeat data in April, the Chinese government is gearing up to quietly unleash a stimulus package worth as much as two trillion yuan (€250 billion) which Beijing hopes will shore up flagging growth.

The economy has slowed considerably in recent months on the back of sluggish export demand and also a series of measures aimed at cooling the property market.

The official target for growth is 7.5 per cent, and this is expected to come out about 1 per cent higher.

The news that China is planning a fresh round of stimulus gave stock markets a lift around the world, although analysts believe that it will have a less marked impact than the last time China introduced a such a plan.

Back then, Beijing introduced a four-trillion yuan (€500 billion) package shortly after the peak of the financial crisis, but this time around it is likely to be between one and two trillion yuan and come in stages.

Tao Dong, a Hong Kong-based economist with Credit Suisse Group, said in a research note that the new stimulus package would help lift growth, which is expected to come in at a slower rate of 7 per cent or even below in the current quarter. The main aim of the stimulus is to give exports a lift, after export growth fell to 4.9 per cent in April, compared to a target of 10 per cent this year.

Talk of a stimulus plan has been the air since earlier this month when Premier Wen Jiabao vowed to focus more on increasing growth after trade and domestic demand were below forecasts in April, data that prompted economists to trim back their outlooks for the world’s second-largest economy. At a state council meeting last week, chaired by Mr Wen, the government said it would encourage private investment in sectors such as energy, railways and telecommunications.

But this would not be a free-for-all stimulus plan.

“The Chinese government’s intention is very clear: it will not roll out another massive stimulus plan to seek high economic growth,” the Xinhua news agency reported.

“The current efforts for stabilising growth will not repeat the old way of three years ago.”

The government’s efforts may help lift expansion in the second half to a range of 8-8.6 per cent, Mr Tao said.

“These policy stimuli can hold the slide in growth and investment demand, but probably not enough to stage a 2009-style rebound,” Mr Tao said. “The central government is likely to play a bigger role in funding, in contrast to last time in 2009 where the local governments relied on bank lending for funding almost entirely.”