(Bloomberg) -- President Xi Jinping signaled that a sharp slowdown in growth and lingering deflationary risks won’t be tolerated, making a series of rare...
-- President Xi Jinping signaled that a sharp slowdown in growth and lingering deflationary risks won’t be tolerated, making a series of rare policy moves to boost sentiment in the world’s second largest-economy.
The stimulus raises expectations for the economy in 2024, and comes after several government-linked economists called for a growth target as high as 5% for next year. Those local governments are finding it harder to service existing debt this year due to the property downturn. Beijing may be more willing to absorb more debt to buoy growth as local governments’ off-budget borrowings become more unsustainable, Nomura Holdings Inc. economists led by Lu Ting wrote in a note.
China has rarely adjusted the budget mid-year, having previously done so in periods including 2008, in the aftermath of the Sichuan earthquake and in the wake of the Asian financial crisis in the late 1990s. The package “is not huge or big” and aims to support growth while “trying to make sure the debt is not increasing in a dramatic way,” Zhu Min, former deputy governor of the People’s Bank of China, told Bloomberg TV in an interview. China’s GDP could grow between 4.5% and 5% next year, he added.
While Xi’s shift away from saddling local governments with the responsibility for driving growth could bode well for China’s economy in the long-term, his reticence for bigger stimulus could protract that process.
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