Ah, the old ‘China will save us’ card is played for the second time in four months: last November it was a $US585 billion stimulus package, with a couple of rate cuts and freeing up of banking lending that sparked a rally on global markets, that faded, and then turned into the latest bear market/correction (markets are off 10%-25% around the world).

In fact, it is now clear the global economy: especially China, Japan, the US, Germany, Taiwan, Canada, South Korea, and yesterday, Australia, saw growth go south from November onwards, with the slide continuing into 2009 and deepening. So much for being ‘saved’ by China.

But this week has seen carefully planted stories coming out of Beijing about how the 2008 National People’s Congress, which starts officially today, would see a major statement. Could it be another stimulus package … perhaps went the leaks.

We do know that Chinese Premier Wen Jiabao is expected to address the Congress today and announce a target growth rate for the year, targets for inflation (no longer a big concern) and estimates for a host of other measures.

He could also reveal additional spending plans and policy changes to help the country’s economy recover, and to make sure the $US586 billion stimulus package of last November, remains on track.

Some Beijing reports say the Chinese Premier will reveal a big boost in the budget deficit for 2009 to meet the upturn in spending on the economy and welfare.

Yesterday, Reuters reported a former senior government official (named) and an unnamed official as saying that a new stimulus package would be announced later today. Here’s how the Financial Times reported it: “Hopes For China stimulus lifts stocks”:

Stocks and commodity prices rose around the world on Wednesday amid hopes that China’s leaders would unveil their second economic stimulus package in four months at Friday’s opening of the National People’s Congress.

The Shanghai Composite, China’s leading stock market index, rose more than 6 per cent in its biggest one-day gain since November, after a senior official said premier Wen Jiabao would outline new spending plans to combat the global downturn at the NPC, China’s legislature.

US and European markets also rebounded after two days of heavy selling, with the FTSE 100 rising 3.8 per cent and the S&P 500 up 1.5 per cent in early-afternoon trading.” (It’s up nearly 3%)

Mining and resources companies led the way. Rio Tinto rose as much as 14 per cent. The prospect of a Chinese recovery reviving global demand also prompted a jump in commodity prices, with copper rising 7 per cent to a three-month high.

Beijing unveiled a Rmb4,000bn ($585bn) investment plan in November, but the rapid deterioration in the global economy has put pressure on authorities to take additional steps to prevent a collapse in Chinese growth.

Li Deshui, a former head of the statistics bureau and ex-member of the central bank’s monetary policy committee, told reporters “a new stimulus package” would be announced by Mr Wen, while Reuters cited an unnamed economic planning official saying extra infrastructure spending would be introduced.

But no one stopped to wonder why, if that November package was supposed to be so big and stimulatory (as we have heard from Government officials for the past month), why more spending is needed.

After a brief run up in steel production and a plunge in stocks or iron ore and coal, China’s steel production has dropped again in the past month. The Australian newspaper’s frontpage picture of huge stocks of iron ore told a story this week. Iron ore sales are slowing, and shippers from Australia and Brazil are going to wait and see if there’s an upturn in demand in coming months to try and limit the huge price cuts. Coal exporters are in the same position.

The speech by the Chinese Premier to the annual meeting of the National People’s Congress is usually a final, sanitised version of debate that has gone on inside the upper levels of the party and the government for the past several months. The figures/targets and policy changes and new measures are hard and prescriptive, not maybes.

The Congress has already been reported as spending a lot of time on welfare, unemployment and the question of ‘social unrest’.

Our market will be up today after the sharp rise overseas. A replay of November?

The consensus is that China will recover in 2009, but that is based on hope and anticipating rather than on any hard and fast data, apart from improving reports from Government released surveys of the country’s services sector.

China will go nowhere and the recovery will peter out if there’s no rebound from major economies such as the US: no rebound in the US economy, no rebound in China, Japan, Taiwan, anywhere in Asia, no matter how much they spend. And the US won’t recover until something is done to quench the damage from the still imploding property and finance sectors.

So far there’s little sign of that happening.