Shoring up struggling local governmnet or focusing on boosting consumption?

By John Barbon

It is not an overstatement to say that Chinese economy is on the edge of an abyss. Although Chinese governmnet has announced some economic stimulus since September, but that is far enough to support embattled economy. There is still more room for the central government to increase debt and the deficit.

In fact, markets have been waiting for new major stimulus package, including debt and decifit change. It remains unclear whether the increasing in debt and decifit could meet the expectations of market, or how much could go directly towards consumption, which is definitely the key point to survive the weak economy.

The projections for how much fiscal stimulus is needed range from around 2 trillion yuan ($283.1 billion) to more than 10 trillion yuan.

China’s retail sales grew only modestly over the last few months, and the country’s real estate slump has shown few signs of turning around. GDP rose by 5.3% in the first quarter and 4.7% in the second quarter of 2024, sparking concerns that China could miss its full-year target of around 5%.

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