The Sound of Economics
China's latest stimulus package: is it enough to save the economy?
Oct 23, 2024
Alicia García-Herrero, a senior fellow at Bruegel specializing in the Chinese economy, and Alfred Schipke, a professor at Lee Kuan Yew School of Public Policy, dive into China's new stimulus package. They unravel its design as a rescue for the ailing economy, particularly its focus on real estate and local government debt. García-Herrero likens it to a cleanup effort, while Schipke points out the lack of direct support for households. They argue for necessary structural reforms to bolster long-term recovery amidst these economic maneuvers.
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Quick takeaways
- China's latest stimulus package is more of a rescue effort focused on immediate financial stability rather than long-term growth.
- The absence of direct household support in the stimulus highlights a significant gap, emphasizing the need for structural economic reforms.
Deep dives
China's Economic Stimulus Measures
China recently announced a significant economic stimulus package to address weak economic data and restore confidence. The government reacted to declining demand and deflationary pressures, which indicated a potential downward spiral akin to past economic challenges in Japan. Key components of the package include monetary and fiscal policies aimed at instilling confidence through aggressive counter-cyclical measures while also assisting local governments facing financial struggles. The package marks a shift from traditional conservative fiscal policies, with a focus on larger state-sponsored financial endeavors to stabilize the economy.
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