China won't act as Santa Claus again in the world's financial crisis, and there's no other candidate in sight to play the role, according to an article in The Straits Times on Sept 22, 2011.

Many expect China again to play Santa Claus, says the article, "handing out gifts of new business - and income - to workers in Detroit, Dublin, Dusseldorf, Dalian and Delhi, mitigating the world's recession woes."

But it is wishful thinking for those with expectations of a large expansion in Chinese government spending or bank credit, notes the article, as it is different from when China announced a 4 trillion yuan (US$621 billion) fiscal stimulus plan.

The article quotes a study last year by the Monetary Authority of Singapore's economic policy group, as saying that if not for the Chinese stimulus, aggregate exports by eight East Asian economies - Hong Kong, South Korea, Taiwan, the Philippines, Singapore, Malaysia, Indonesia and Thailand - might have been 22 per cent lower than they were in the second quarter of 2009 and thus China helped East Asian exports recover fully and surpass their 2007 peak by the end of 2009.

Local governments owe 8.5 trillion yuan to banks, according to Deutsche Bank's Hong Kong-based economist Michael Spencer. "If 30 per cent of the banks' loans to local governments were to become non-performing, with the historical record of about a 20 per cent recovery rate on the resolution of non-performing loans, this would imply losses on the order of 5 per cent of GDP," he estimates.

So, if the global economy slips into recession, the article predicts, China will surely ease its monetary-policy stance, but the authorities can't stimulate the domestic economy by piling up more risk on the balance sheet of the financial system, as they did in the final quarter of 2008 and in 2009.