China running out of options to bolster confidence in slowing economy, analysts said

There is growing concern that China lacks the options to stop the rapid decline in business and consumer confidence in its economic outlook, which could create a self-reinforcing cycle of lower investment and spending that would accelerate the slowing of the country’s growth rate, analysts said.

The problem is that the already high level of debt in the economy – in government, businesses and consumers – is hamstringing Beijing from enacting an aggressive economic stimulus programme for fear of making the problem much worse.

Significant economic reforms and a further opening of the domestic economy may be the only way to shore up confidence and draw a line under economic growth, analysts said.

Beijing’s effort to stabilise growth through modest stimulus have been only partially successful, and some analysts are worried that the government may be running out of time to bolster growth before the lack of confidence becomes entrenched.

China has so far refused to engage in the massive stimulus it enacted after the 2008 global financial crisis, seemingly banking on an early trade deal with the United States that ends, or at least de-escalates, the trade war.

While China’s growth rate is likely to hit the government’s 6.5 per cent target for 2018, analysts expect the economy to slow further in 2019, perhaps significantly so, due to the effects of the trade war.