China needs process, time to heal economic scars left by coronavirus, ex-finance minister Lou Jiwei says
- China’s slower-than-expected economic recovery is a growing concern among investors and businesses, especially the country’s mounting local government debt
- Former finance minister Lou Jiwei suggests increasing China’s fiscal deficit by between 1.5 trillion yuan (US$208 billion) and 2 trillion yuan
Beijing should not bail out its indebted local governments, and instead an increase in its fiscal deficit is needed to speed up China’s economic recovery, according to former finance minister Lou Jiwei, who said a “process” is needed to heal the “scars” left by the coronavirus pandemic.
In an interview with the state-backed China Daily, as well as in an article published by the Shanghai-based The Paper over the weekend, Lou said that policymakers need to adjust their priorities “in time” to “restore” the economy.
Lou was China’s finance minister between 2013 and 2016 and has been vocal about the country’s economic problems.
Only when the balance sheet returns to normal and confidence is restored, can companies dare to invest
“The scarring effect caused by the pandemic is relatively serious,” said Lou.
“Enterprises, residents and local governments are all repairing their balance sheets, and it is a process to restore confidence. Only when the balance sheet returns to normal and confidence is restored, can companies dare to invest.
“Residents dare to consume only when the employment situation improves and they have confidence in their future income. Correspondingly, fiscal revenue will also increase.”
China’s slower-than-expected recovery has been a growing concern among investors and businesses, especially the country’s mounting local government debt.