Macroscope | China must boost fiscal stimulus as global and domestic challenges loom

Name: Life with no power: Why some major cities in China are having to ration electricity
Uploaded: 2021-10-04T14:30:27.000Z
Duration: 3 min 30 s
Description: Life with no power: Why some major cities in China are having to ration electricity

Recent Chinese economic data and global trade figures are an early warning signal that global recovery is slowing in the face of several lingering problems

China should not turn to much looser monetary policy to get faster results, given that fiscal expenditure can be increased without great damage to government finances

Reading Time:3 minutes

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Workers produce swimming suits at a factory in Jinjiang in southeast China’s Fujian province. Photo: VCG

David Brown

Published: 10:30pm, 4 Oct 2021Updated: 11:56pm, 4 Oct 2021

China needs to step up as the world economy shows more signs of growing duress. Global supply chain shortages, rising world energy prices, lingering Covid-19 uncertainties and ebbing economic confidence are adding weight to the notion of economic slowdown ahead.

China also has to face the challenge of potential market disruption on the home front, ready to contain any fallout from Evergrande’s debt saga. Critically, Beijing must be quick to stop the slowdown turning into a bigger rout. It’s the cue to keep its economic policy spigots wide open, not least with a bigger fiscal push while keeping in check any temptation to go for faster domestic credit expansion.

With the right policies in place, Beijing can easily insulate the economy from most downside risks and keep growth cruising at a steady 5.5 per cent to 6 per cent pace in the next few years. Stability is the key, as is continuing to build on the economy’s strengths.

Judging by recent business activity indicators, economic confidence in China is clearly feeling the strain. The latest manufacturing purchasing managers’ indexes from the National Bureau of Statistics and Caixin Insight Group show mainland business activity languishing around the boom-or-bust mark of 50.

It’s consistent with China’s factory sector generally maintaining a steady rate of expansion but well below the robust rate of recovery experienced earlier in the year as the economy bounced back from the worst of 2020’s Covid-19 emergency. Respondent firms indicated relatively subdued demand conditions and material shortages were weighing on production.

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Life with no power: Why some major cities in China are having to ration electricity

Employment activity and new export orders both dipped below the critical 50 marker, suggesting domestic and external demand conditions remain vulnerable and in need of an extra lift.

.css-1m2rp1p{color:#34b8b5;}Macroscope | China must boost fiscal stimulus as global and domestic challenges loom

Macroscope | China must boost fiscal stimulus as global and domestic challenges loom