Coronavirus: China should avoid ‘bazooka’ efforts to rescue economy, warns top economist Yu Yongding

China has so far resisted in making major moves to offset the impact of Covid-19 in contrast to Europe and the United States

G20 leaders will hold a virtual meeting next week to put forward a coordinated set of policies in response to the global outbreak and its human and economic impact

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Yu Yongding’s comment is one side of an ongoing debate on whether China should enact a new round of economic stimulus measures immediately, or wait to ensure that the coronavirus outbreak is fully contained. Photo: Bloomberg

Published: 1:29pm, 19 Mar 2020Updated: 11:01pm, 19 Mar 2020

China should not rush into following international calls for major stimulus efforts to fight off the economic impact of the coronavirus pandemic, according to prominent Chinese economist and former central bank adviser Yu Yongding.

Yu’s comment is one side of an ongoing debate on whether China should enact a new round of economic stimulus measures immediately, or wait to ensure that the coronavirus outbreak is fully contained, and only then determine what needs to be done to support growth.

The International Monetary Fund on Tuesday called for a “coordinated and synchronised global fiscal stimulus” to bolster the world economy, given that private analysts now largely expect the world to fall into recession this year.

Yu, a senior researcher with the Chinese Academy of Social Sciences, argued that while China has more fiscal and monetary policy room to manoeuvre than its counterparts in Europe and the United States, the country’s top priority should be to focus on epidemic control and the full resumption of production in factories closed during the height of the outbreak.

Expansionary fiscal and monetary policy can be used later to win back the lost time as much as possible

Yu Yongding

“Expansionary fiscal and monetary policy can be used later to win back the lost time as much as possible,” said Yu, who is an advocate of economic stabilisation efforts.

On the other side of the debate, the China Wealth Management 50 Forum, a think tank led by former central bank deputy governor Wu Xiaoling, argued in a recent report that China should increase its fiscal deficit to 3.5 per cent of gross domestic product this year, above last year’s 3 per cent target.

The think tank also said China should issue an additional 1 trillion yuan (US$142 billion) in special treasury bonds to fund infrastructure investment and support growth. Last year, China sold 4 trillion yuan of treasury bonds, with the target for 2020 yet to be released due to the postponement of the National People’s Congress.