Is all that talk from the past three weeks — the death of the resources boom and the gloom about weak iron or prices — about to end? And have the gloomy Australian media missed the bus on a significant move by China late last week to stimulate the economy? Or is China indulging in another round of talks about new spending that it will find almost impossible to back with cold, hard cash? Lots of questions without real answers at the moment, except the latest data from Beijing do confirm the slowdown in the Chinese economy is getting rougher.

The new spending announcements in China late last week were substantial — more than $US150 billion over the next four to six years, much of it on on steel-consuming infrastructure, such as roads and subways. On the face of it, a substantial commitment and needed, as we have seen in the past two months with the increasingly gloomy news about the economy and demand for steel and iron ore and coal.

And there’s certainly a need for new investment spending. The latest economic data for August showed no sign of the the slowing economy bottoming out yet. Industrial output continues to slide, growing by an annual rate of 8.9% in August, down from 9.2% in July. That’s the slowest since May 2009, when the economy was emerging from the late 2008 crunch. It is a sign current slowdown is not losing momentum. Power output rose 2.7% from August last year, compared with 2.1% (it has been a warm summer so far). But growth in production of rolled steel eased to 1.4% from the 6.5% rate in July.

Urban fixed-asset investment increased 20.2% year-on-year in the first eight months of the year, 0.2 percentage points slower than the growth of the January-July period. But retail sales rose 13.2%, only 0.1 percentage point higher than the growth rate in July. And inflation rose to 2% (annual in August) from 1.8% in July.

The easing in the rate of growth in industrial production confirms the slowdown seen in last week’s two main monthly surveys of manufacturing activity in China to levels not seen since early 2009. Later today we get more detail on production and on imports, exports and the trade balance for August.

But perhaps the most telling indicator of the depth of the slowdown was an intensifying in the price deflation for industry last month. China’s producer price index dropped at an annual rate of 3.5% from a year earlier with the month-on-month fall hitting 0.5%. The fall compared to the 2.9% (annual) drop in July. It was the sixth straight month of producer price deflation, an indication of how the slide in demand is forcing down prices for industry. The accelerating pace of price deflation for industry is a sign of the intensity of the slowdown. It’s hurting and there’s no respite in sight thanks to overproduction and weak demand. In contrast, consumer prices rose an annual 2% in August (1.8% in July), as food prices rose more sharply that expected.

But analysts in China and offshore wonder if there’s the political will and the finance available to make sure the ambitious projects announced last week are followed up. The money will have to come from state banks, which are already overloaded with debt and engaging in loan extensions called “extend and pretend” arrangements. But the news had a big impact in China, London and US markets Friday.

The slide in the Australian dollar was reversed. Worries about China’s economy and the plunging price of iron ore had started pushing the Australian dollar lower and midway through last week it hit a two-month low of $US1.0167. But by Friday it had put that well behind to finish 2.5 cents up from that low early Saturday at just under $US1.04. And shares of BHP Billiton, Rio Tinto and other major resource companies jumped by 6% or more in some cases. China’s sharemarket rallied 3.7% on Friday in the biggest one day rise for eight months after news of the new spending plans started spreading. Shares in steel companies rose sharply as well, despite being unprofitable and heavily overstocked with steel products of all types.

The news of the new spending plans in China also helped offset a weak US jobs report for August (96,000 new jobs and 41,000 less in June and July than previously reported), and more weak data from Europe. Copper hit a four-month high of just over $US8000 a tonne, another indicator of the enthusiasm by investors for the story, but not necessarily the fact of whether the spending will happen.

It will be early 2013 before there’s any sign these projects are to be financed and we see an improvement in demand for raw materials. The slide in prices in China has a lot of momentum, especially with the 80 top medium and large steel companies reporting total losses at ¥1.98 billion  ($US312 million) for July, according to media reports in Beijing on Friday. Besides overstocking of steel, there are continuing reports of similar stockpiles of other raw materials and finished products, such as white goods and cars.The news from China will boost markets in Asia today after the solid rise in Shanghai and good gains in Europe and the US, which built on the rally of the day before after the ECB has revealed plans to start buying bonds of troubled countries such as Spain, if they agree to be rescued. Strangely, Australian newspapers missed the market rise and the reasons for it at the weekend. They were content to report on the slide in iron ore prices in particular and how this meant the death of the mining boom, especially for companies such as Fortescue Metals.

The new spending in China was reported on the official Xinhua website, and by Reuters and Bloomberg, as well as the Asian edition of the Financial Times. Chinese President Hu Jintao said to APEC in Vladivostok that the slowdown in exports is putting downward pressure on the world’s second-biggest economy, and he pledged to boost domestic demand and promote more balanced growth. “Economic growth is facing notable downward pressure, some small and medium enterprises are facing a hard time and exporters are facing more difficulties,” Hu said. “We have an arduous task of creating jobs for new entrants to the labour force.”

That’s behind the approval given to 60 infrastructure projects worth more than $158 billion last week. The approvals are just under the $US485 billion stimulus package unleashed in response to the global financial crisis in 2008. The money will be rolled out over several years and the government has not described the investments as a stimulus package, but on Wednesday and Thursday of last week, the country’s main economic planning body, the, the National Development and Reform Commission, approved approved plans to build 2018 kilometres of roads, nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades.

Xinhua said the announcements came a day after approvals for subway projects in 18 cities, an earlier rise in the railway-building budget and increases in land supplies in cities including Guangzhou, Hangzhou, Beijing and Shanghai.

Footnote: China last week revised its 2011 GDP figure up by 0.1% to 9.3%. Doesn’t sound much, but it was another $US20 billion of value creation in the year, with the increase coming all from services and more than making up for lowered contributions from manufacturing and the rural sector. In Australia a $US20 billion rise in GDP for a year would be more than 1.2% on a figure of nearly $US1.5 trillion for this year or a bit more.