Economy

China and the Dilemma of the Economic Stimulus Measures

Yu Yongding is the former central bank adviser and current prominent economist. According to him, in following international calls for significant stimulus efforts, China should not rush. Bids are to fight off the economic impact of the coronavirus pandemic.

China stands against the dilemma. The dilemma is whether China should wait to ensure that the coronavirus outbreak is fully contained, and only then determine what needs to be done to support growth or enact a new round of economic stimulus measures immediately.

On Tuesday, the International Monetary Fund called for a synchronized and coordinated global stimulus. It was to bolster the world economy, considering that the private analysts now mostly expect that the world will fall into recession this year.

Yu is also a senior researcher. He and the Chinese Academy of Social Sciences said that China has more monetary policy and fiscal room for maneuvering than its counterparts in the United States and Europe. Nevertheless, they add that the country’s top priority must be focusing on epidemic control. Also, they must focus on the full resumption of production in factories closed during the height of the outbreak.

Yu is an advocate of efforts for economic stabilization. He said that expansionary monetary and fiscal policy could be helpful later to win back the lost time as much as possible.

China Wealth Management 50 is a think tank. It is led by former central bank deputy governor Wu Xiaoling. On the contrary, he argued in the recent report that China this year, China must increase its fiscal deficit to 3.5 percent of GDP. Last year the percentage target was three percent.

Think Tank of China

Moreover, the think tank also said China must issue an additional US$142 billion (1 trillion yuan) in individual treasury bonds for supporting growth and funding infrastructure investment. China sold 4 trillion yuan of treasury bonds last year. The target for 2020 release was postponed because of the National People’s Congress.

Amid the growing signs that China is successful in containing the outbreak, the debate is taking place.

For the first time since the outbreak began, On Thursday, the National Health Commission reported no new domestic infections. Nationwide, there were 34 new infections, but all from people who arrived from overseas.

Next week, the leaders from the G20 economies will most probably hold a virtual meeting. There they will seek to put forward a set of coordinated policies in response to the global outbreak of Covid-10. It will be in a bid to alleviate its economic and human implications. That is what Saudi Arabia announced on Tuesday. The country is the current chair of the international forum.

It is not clear if Beijing will offer support at a meeting for the coordinated response to the economic damage caused by the pandemic. Nevertheless, on Wednesday, a meeting of its top decision-making body said that China would strengthen its analysis of the international financial situation. Moreover, they said that they would make timely countermeasures.

All in all, until now, Beijing has held back to make any bold economic stimulus plans.