Chinese investment bank joins chorus of experts as calls for fiscal stimulus intensify

A report published by a major investment bank has made the case for direct fiscal support to fuel economic growth and spur activity

Bank joins other economists and industry professionals in growing cohort recommending payments to households over credit stimulus

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China International Capital Corporation has recommended direct fiscal stimulus over measures related to business credit relief in a new report. Photo: EPA-EFE

Published: 10:00pm, 26 Feb 2024

A leading Chinese investment bank has amplified calls for Beijing to bolster fiscal support to consumers and businesses, citing a relative gulf in effect for pandemic-era stimulative actions taken by China and the United States.

China International Capital Corporation (CICC) issued a report on Saturday discussing the economic divergences that have emerged between the two superpowers, presenting a case for demand-side measures as Beijing attempts to leverage domestic consumption to drive up growth and make its financial system more efficient in serving the real economy.

“The US had bigger fiscal expansion during the Covid years. China needs to crank up fiscal support in the near term to break the vicious spiral as weak economic fundamentals and weak confidence are feeding off each other,” said Kevin Liu, a managing director of CICC Research.

“More fiscal support can encourage consumers and the private sector to invest and expand,” he wrote.

Lawmakers will convene in the Chinese capital next week to review the year’s policy agenda and national economic targets.

Many economists have argued for more fiscal spending since Beijing issued 1 trillion yuan (US$138.9 billion) of special treasury bonds in October, which lifted the country’s fiscal deficit ratio to 3.8 per cent of gross domestic product (GDP) from the previously budgeted 3 per cent.

In the US, money reached people’s hands, while in China, the money [came] from banks and ultimately flows back to banks

China International Capital Corporation report

The CICC report is one of several which have addressed the topic of fiscal expansion by making direct comparisons between China and the US. Surpassing the US in GDP has been cited as a long-term pursuit of Chinese leadership, although it has not been made an explicit target in government documents.