As growth slows, China's leaders appear to have put economic reform on a back burner. And that presents investors with some interesting opportunities, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

China's leaders have thrown in the towel. Yep, they've decided to go for growth now and let reforms wait.

Remember all that rhetoric about the need to move China's economy away from export-driven growth and toward domestic, consumer-driven growth? Forget it.

Remember the pledges not to repeat the infrastructure and industrial spending that rescued the Chinese and global economies during the financial crisis in 2008? Toss 'em in the trash.

Remember the efforts to dampen-real estate speculation, and to cool China's overheated real-estate sector? Stamp them “rejected.”

A Reaction to Slower Growth
China's leaders have read the official numbers that show China's economy slowed to a 7.6% annual growth rate in the second quarter of 2012.

They've looked at the unofficial numbers—things like electricity consumption—that strongly suggest the official growth numbers are significantly overstated. And they have read the projections from the International Monetary Fund and others that Europe's slowdown will be even more pronounced than expected in the second half of 2012, and the recovery in 2013 anemic.

They've decided that the risk to their control of China is just too great. The implicit bargain between China's leaders and the Chinese population is that the Communist Party will deliver economic growth and a rising standard of living. That remains the government's priority. Reform of the country's economy will just have to wait.

Without fanfare, without any of the hoopla that accompanied the stimulus flood of 2008, without even a clear reversal of former rhetoric, China's leaders have gone back to the tried-and-true playbook. China has once more embarked on an investment-driven, infrastructure-heavy, government-financed effort to stimulate the economy.

In the short run, I think it will work. Growth will rebound in China, and that will push growth higher in the global economy, too.

In the long run, though, it will leave in place all the inefficiencies and misallocations that the now-abandoned program of reform was supposed to address. The fix has been put off to another day.

China is hoping that the problems won't be much worse by the time it is ready to deal with them. But I think down the road, it will be just that much harder for China to tackle its fundamental economic problems, from a crony-favoring banking system to zombie state-owned enterprises.

Reading the Tea Leaves
What has happened in the last few weeks to convince me that China has made this huge shift in policy—without a major policy announcement? Take a look at two important indicators: airports and railroads.

On July 12, the Web site of China's State Council reported that China will increase spending on construction of airports and other air-travel infrastructure. The statement was the second recent official notice of the government's intention to increase spending on air-travel infrastructure.

On June 11, the head of China's Civil Aviation Administration, Li Jiaxiang, told the online version of the People's Daily that China's major airports are now running at full capacity, and that China will build 70 new airports and renovate or expand 100 existing airports. That's a big increase from the plans for 45 new airports within five years announced in 2011.

On July 17, a document posted on the Web site of the National Development and Reform Commission's Anhui office reported that the government had increased its investment goals for China's railroad system by 9% from the previous 411.3 billion yuan ($64.5 billion) total. Full-year spending will climb to 448.3 billion yuan. That would require about 300 billion yuan of investment in the second half of 2012, up from 148.7 billion yuan in the first half of the year.

I think this expansion in railroad spending takes an ax to the argument that China wouldn't be able to pursue a 2008-style stimulus package because the country's banks, local governments, and government ministries have taken on too much debt.

 The new railroad spending total was preceded by a huge increase in the debt ceiling at China's deeply indebted Ministry of Railways. In February, the Ministry of Railways was brushing up against a ceiling that limited its debt to 40% of its assets. That limit would have allowed the ministry to issue just $2.1 billion more in bonds.

But on May 29, the State Council approved a proposal by the National Development and Reform Commission to increase the debt limit to 100% of the Railway Ministry's assets from the previous 40%.

It sure doesn't look to me as if the debt already on China's books will keep it from being able to stimulate its economy the way it did in 2008.

Tickers Mentioned: Tickers: CEA, ZNH, ACH, BHP, FCX