China will not turn to global financial crisis stimulus playbook to offset US trade war, says Beijing adviser
- Liu Shangxi, the head of the Chinese Academy of Fiscal Sciences, says Beijing will rely on tax reductions and budget management reform
- US$580 billion stimulus package used in 2008 after the Lehman Brothers bankruptcy will not help China’s weakening economy, he says
China will not introduce another “giant stimulus programme” similar to the one seen during the 2008 global financial crisis to offset the ongoing trade war with the United States and its weakening economy, according to a leading Chinese government researcher.
Liu Shangxi, head of the Chinese Academy of Fiscal Sciences, an important think tank under the Ministry of Finance that advises Beijing on fiscal policy, said that instead, Beijing will rely on tax reductions and budget management reform, because the 2008 package helped lead to inefficiencies and overcapacity in the manufacturing sector.
“We will not introduce another giant economic stimulus programme for the problem we are faced with now – consumers are asking for greener, healthier and better goods but cannot find them in the market – it is different from the problems in 2008,” Liu said on the sidelines of a China-US trade and economic relations conference in Hong Kong.
“Though the stimulus programme was a necessity back in 2008, we need to admit that it caused overcapacity and low quality goods,” said Liu, in the first public comments from a leading Chinese government adviser on China’s trade war mitigation strategy since the US and China reached a tariff ceasefire in Osaka, Japan at the end of June.
China cut the rate of its value-added tax for manufacturers from 16 per cent to 13 per cent in April and the rate for transport and construction companies from 10 per cent to 9 per cent, to reduce businesses’ tax burden, improve income distribution and support employment.