China’s slowing economy needs fiscal spending to aid post-coronavirus recovery, hit growth target

China should increase fiscal spending to further support its post-coronavirus recovery and help reach its economic growth target for the year, particularly after the central bank sent a signal that it expects slowing conditions ahead when it signalled last week that it would cut the reserve requirement ratio last week, analysts said.

Calls for further monetary and fiscal policy stimulus have risen, with China’s headline growth set to slow after an explosive rebound from the lows of a coronavirus-hit 2020 and in response to the likely fallout from continued tensions with major trading partners.

A mainstream forecast of around 8 per cent year-on-year growth for the second quarter – impressive in comparison with major Western economies – analysts have expressed concerns of impending problems. These include a potential slowing of exports, weak consumption and rising bad loans.

Ahead of the release of second-quarter economic data on Thursday, plus industrial production and retail sales figures for June, confirmation that China’s exports grew by 32.2 per cent last month from a year earlier came with a warning of coronavirus-related uncertainties and likely slowing trade growth in the second half of the year.

“Economic stabilisation and risk prevention will be the major tasks for the second half of this year,” said Tang Jianwei, chief analyst at the Bank of Communications.