The G20 have chosen to go with China, not the U.S., where fear and loathing of Obamanomics have seized the economy

The G20 appears to be placing a large bet on China’s policymakers. At their summit last month, one developed country after another, bar the US, said they would cut fiscal deficits.

“If these economies all decide to reduce their budget deficits, what will drive global growth?” asked Simon Johnson, the former IMF chief economist. “The answer in Toronto was obvious: China.”

China’s economy needs to slow from the turbocharged growth in the second half of last year and first quarter of this, which was fuelled by a huge increase in bank lending. But the second-quarter figures will be one of the early signs of whether China can pull off a measured cooling or whether the economy will slump when stimulus is taken away.

The Chinese economy is going through two delicate transitions. Worried about overheating, Beijing has applied the brakes in the two sectors that helped propel the recovery from the financial crisis last year, ordering a clampdown on property speculation and limiting lending to local government infrastructure projects.

At the same time, it is trying to find a growth model that relies less on the 20 per cent-plus increases in exports that it enjoyed for most of the past decade.

“The economy is not facing a hard landing but the current slowdown is leading China into growth below 10 per cent in the years ahead,” Mark Williams at Capital Economics says.

One of the keys to whether China will avoid an abrupt slowdown is the performance of the property sector. Since the introduction of policies to limit speculation in mid-April, the market has almost come to a standstill. Standard Chartered reports that sales are down 60 per cent in 14 big cities.