Coronavirus: China should not rely on massive stimulus to overcome ‘unprecedented’ economic slowdown

In response to the 2008 global financial crisis, China pumped a 4 trillion yuan (US$575 billion) into its economy but it led to a mountain of local government debt

Various early indicators suggest China’s economy will slow in the first quarter of 2020, with some suggestions it will suffer a first contraction since 1976

Reading Time:4 minutes

President Xi Jinping said China must accelerate construction of “new infrastructures such as 5G networks and data centres” on top of speeding up “key projects and major infrastructure construction” in response to the economic impact caused by the coronavirus outbreak. Photo: Xinhua

Published: 8:15pm, 12 Mar 2020Updated: 2:49pm, 16 Mar 2020

China should not try to bolster its coronavirus-hit economy by again resorting to a massive debt-fuelled fiscal and monetary stimulus programme, according to a group of government advisers.

Various early indicators suggest China’s economy will slow in the first quarter of 2020, with some even suggesting it will suffer a first contraction since the end of the Cultural Revolution in 1976.

This raises the question if China will miss its key 2020 growth target, with voices on both sides of the debate discussing what stimulus policies are needed to offset the deep impact of the coronavirus.

China is already leaning towards some additional stimulus, with Premier Li Keqiang ordering the central bank pump additional money into the banking system, while President Xi Jinping has announced the need for more spending on “new infrastructure”.

Are there other ways out for China except stimulus policies?

Liu Shijin

“Are there other ways out for China except stimulus policies?” rhetorically asked Liu Shijin, who previously worked closely with Vice-Premier Liu He, the top economic aide to Xi, at the Development Research Centre, the think tank attached to the State Council.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x