BEIJING China has been forced into self-help mode after a series of international crises have hollowed out its export markets and left it feeling like the only man standing.
But Beijing may not have time to administer its ideal medicine -- a project to spur domestic demand.
Instead, policymakers may be spurred to action by a sharp weakening in the domestic picture -- and the measures they choose are likely to err on the side of growth at any cost, rather than much-needed restructuring.
"My concern is that when we look at the numbers they are very reminiscent of early 2008 and that was not a good scene," said Arthur Kroeber of economics consultancy Dragonomics. He asserts that weaknesses in steel demand and construction are signs that all is not well in China.
"They see things slowing down so they will do what they can, which means all rebalancing will be kicked down the road," Kroeber said. "They are more interested in retaining growth through the channels they have."
Or, as China's vice premier Wang Qishan put it this week: "An unbalanced recovery would be better than a balanced recession."
Already, bank lending is reviving, after months of a credit crunch that starved China's private sector -- the most productive in terms of jobs and taxes -- forcing more and more companies to turn to underground banking and loan sharks for funds.
This week, China confirmed it is pressing ahead with a vast spending plan for so-called "strategic sectors."
Other measures by which China might stimulate growth include a pilot VAT tax reform and some reduction of fees to smaller firms -- both of which should help the private sector which had been left out in the cold during the past three years of emphasis on big, state-owned firms.
There are voices calling for serious structural reform -- sometimes from surprising quarters. Prominent newspapers carried an editorial from an Agricultural Bank of China economist saying that a stronger yuan would help China transform its economic model, and another editorial from a vice minister of industry saying that the overseas crises would force Chinese industry to raise its competitiveness.
Long Yongtu, the man who negotiated China's entry to the World Trade Organization, told Reuters that provincial leaders support a greater opening of the economy.
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Internationally, the financial crises roiling the West are expected to hit China's export sector, which still accounts for about 15 percent of GDP and employs millions in the coastal regions.
But worryingly, the latest HSBC purchasing managers' index showed that while new orders for exports held their ground, overall orders had their biggest drop in a year and a half -- implying that domestic demand is as much a concern as exports.
China's factory sector shrank the most in nearly three years in November, data released on Wednesday showed [ID:nL4E7MN0EA].
China has long said it wants to reorient the economy toward more sustainable, consumer-led growth. But the huge stimulus it launched to stave off a slowdown during the global financial crisis of 2008 -- a program totaling about $650 billion -- had the opposite effect. It transferred more of the nation's assets to the less productive state sector.
Return on investment in China is falling fast, in yet another sign that deferring restructuring can only eke out a few more years of rapid growth.
"I think it will take another 3-5 years before we see a real rebalancing. At the moment, growth is very much driven by investment," said Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong.
"If you talk about investment ratio close to 50 percent, that's too high."
But driving demand is a long-term project. Among other things, it would require structural changes to give more space to the private sector, and would include better welfare and health programs so that China's savers are willing to spend more of their cash.
"The bottleneck for GDP growth is not supply. The Chinese economy is oversupplied with goods. The shortage is demand," Li Daokui, an advisor to China's central bank, said at a conference last week.
This time around, China has confirmed it wants to see a staggering 10 trillion yuan ($1.57 trillion) put into strategic industries over the next five years, most of that through corporate spending and bank lending rather than direct government stimulus.
The targeted sectors include alternative energy, biotechnology, new-generation information technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars and energy-saving and environmentally friendly technologies -- all buzzwords for the new, more sustainable Chinese economy.
But the details of where exactly the money would be spent remain foggy. Some of the likely big ticket items include nuclear power and rail investment, but the latter has been scaled back due to the Railway Ministry's high debt levels and a fatal crash. Even China's most ambitious nuclear investment scenario would not require that much spending.
Arguably, what China's high-tech sector needs is more competition and protection for intellectual property advances, not companies with connections being force-fed cash.
Past experiences provide a sober lesson. A few years ago, China eagerly promoted its solar power sector as a sign of its commitment to new energy and jobs at home. But what actually happened is that most of the panels produced headed overseas due to lack of domestic incentives for solar power.
Now that overseas markets have weakened, the solar power sector is reeling from overcapacity and plummeting prices.
($1 = 6.3608 Chinese yuan)
(Additional reporting by Nick Edwards and Kevin Yao in BEIJING; Editing by Don Durfee and Richard Borsuk)