Don’t look to China to head off the ongoing global economic slowdown.

With the U.S. recovery stalling and much of Europe in recession, China remains the last major region keeping the global economy moving ahead. But there was fresh evidence Friday that the Chinese dragon’s fire is cooling.

China’s economic growth fell to a three-year low, the government reported, as the world’s second-largest economy grew by 7.6 percent over a year earlier in the three months. That’s the worst showing since the financial panic of 2008 sent the global economy reeling.

Now, as its economy slows, China’s leaders are cutting interest rates and boosting spending to maintain growth, which is expected to pick up again later this year. But those measures aren’t expected to be as aggressive as the massive pump-priming that followed the financial collapse of 2008 and helped stave off a global economic slowdown.

“I think this cycle is very different from 2008-2009,” said Jing Ulrich, chairman of global markets, China, at JPMorgan. “Back in 2009, China was the savior for the world economy after launching an aggressive stimulus program. This time around the central government is acting very, very conservative. We don’t think there will be a large scale stimulus programme.”

China’s leaders are walking a fine line as they try to steer the country’s command economy from heavy reliance on government spending — more than half of GDP — to more sustainable, consumer-driven growth backed by private investment.

The massive stimulus in 2009 rescued the country from the threat of economic collapse posed by the global financial crisis. But it sowed the seeds of a painful bout of inflation for Chinese citizens.

“(The government) overstimulated the economy. Yes, they created growth but they also created a property bubble and too much debt,” said Gordon Chang, author of ‘The Coming Collapse of China.’ “Now you have the downside of the sugar high. That’s why you’re going to see less in the way of stimulus, because they know that the Chinese economy can’t stand another round of investment.”

That’s not good news for China’s trading partners and suppliers. The U.S. economy is having trouble getting off the ground amid stubborn joblessness, Washington gridlock and cooling consumer sentiment. Recession is either afflicting or threatening many European countries while the 17-members of the eurozone try to wrestle down a debt crisis. The world was looking to China, as it did after the 2008 financial crisis, the provide the momentum to keep the global economy growing.

A new round of stimulus in China also risks re-igniting inflation, which has only recently been brought back under control. For the moment, with a tight job market pushing wages higher, the price squeeze on Chinese households is easing.

But analysts say China’s political leaders are leery of moving too quickly to boost growth if that risks sending prices soaring again.

“They’ve got plenty of ammo in the magazine to restimulate later in the year if they think they’ve stepped on the break too hard,” said James Ferguson, head of investment strategy at Westhouse Securities. “But if inflation starts to get out of hand then civil unrest is the next step. The biggest fear of all would be a slowdown at the same time as inflation.”

To be sure, even at the current slower pace, growth in China would look like boom times in the larger, developed economies of the U.S. or Europe. And the slowdown is part of a carefully engineered series of government measures taken in the past two years to cool down inflation and contain a rapidly expanding real estate bubble.

“It is often forgotten that this recent slowdown has been an orchestrated one,” said Cameron Peacock, a market analyst for Australia’s IG Markets. “Mission accomplished. China now has the room to re-stimulate its economy.”

But even if recent measures to revive growth are successful, China has likely seen the last of double-digit annual growth — a pace that many economists have long said was unsustainable. Chinese officials acknowledged Friday that the economy is entering a new phase in the country’s development plan, first unveiled by Deng Xiaoping in 1982.

“After 30 years of vigorous growth, China’s economy has entered a period of transition,” government spokesman Sheng Laiyun said at a news conference. “The potential growth rate will drop.”

But China’s rapid pace of urbanization means it must continue to create jobs much faster than developed economies or risk widespread social unrest. The massive 4 trillion yuan ($635 billion) stimulus program in 2009 followed the loss of 20 million jobs in a matter of months at the end of 2008, as the global financial crisis all but halted global demand for China’s exports.

Beijing’s hope is that rising wages and continued expansion of the country’s urban workforce will create enough consumer demand to replace the economy’s reliance on government spending on infrastructure. But that may not be happening fast enough to sustain China’s annual growth target of roughly 8 percent. Like their counterparts in the developed economies of the U.S. and Europe, Chinese consumers have gotten nervous lately.

“We’re seeing Chinese consumers becoming more conservative,” said Ulrich. “Sentiment is not as strong as before. So throughout 2012 we’re expecting consumer spending compared to previous years to be relatively lackluster.”

China’s industrial production, meanwhile, has been hit by slowing demand from Europe as that continent struggles to reverse a deepening recession. That slower demand has sent prices falling for a variety of commodities and raw materials from oil to copper. That, in turn, is expected to provide some stimulus to help ease downward pressure on growth.

But slack Chinese demand is also pressuring growth in the Asian economies that are Beijing’s biggest supplier of industrial components and raw materials.

“The Asian countries that export to the world, in particular to Europe, are the ones that are suffering the knock-on consequences of this (slowdown),” said Ferguson.

Lower commodity prices have also helped ease the threat of inflation, giving central banks in China and around the world more leeway in cutting interest rates. China has cut two of its benchmark interest rates in the last month and its central bank is prodding lenders to supply more capital to businesses.

But with global interest rates already near zero, the impact of China’s central bank moves may be limited just as they’ve been in the U.S. and Europe.

“(The GDP numbers) aren’t weak enough to prod the Chinese government to stimulate the economy further,” said Diane Lin, a fund manager at Sydney-based Pengana Capital. “Our biggest fear at the moment is a late response form the government  that could lead to a further weakening of the economy.”

The government’s response is also overshadowed by the upcoming change in political leadership of the Chinese Communist Party, which is expected to unfold in the run-up to the next meeting of the National Party Congress in November. As part of a ten-year leadership cycle, more than half of China’s top 25 leaders will be retiring— including party leader Hu Jintao and Premier Wen Jiabao.

The transition adds another element of uncertainty to China’s role in helping to revive the sagging global economy. Just as the looming budget battle in the US has effectively been put on hold until after the November election and European governments have been upended by the ongoing financial crisis, China’s economic policy responses must now come from a government undergoing a major restructuring.

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