According to top Chinese economist Yu Yongding, economic stimulus packages need to be as big as possible – and details should also be revealed as soon as possible
 |
| Mr. Yu Yongding, former advisor to the People's Bank of China (PBOC). (Source: Bund Summit) |
According to this expert, to maximize the impact of the new economic stimulus package, Beijing should be ready to "open its wallet" much more than the 4 trillion yuan (about 564.7 billion USD) - which was launched after the 2008 financial crisis.
In an exclusive interview, a former adviser to the People's Bank of China (PBOC) said the central government should quantify its economic stimulus plan as soon as possible - ideally with a specific, detailed timeline.
“With only three months left in the year, rushing into a fight to restore growth could have serious side effects. If it is too late this year, we may have to do it again next year. We cannot rush into action, but we cannot delay in giving policy signals,” he said.
Stimulus measures from the world's second-largest economy continue to be one of the most watched moves in global markets.
Over the weekend, China's Finance Minister announced a massive fiscal stimulus package worth more than $300 billion. The continuous stimulus packages into the capital market, real estate, and consumer markets since late September show that China is making great efforts to achieve its 2024 GDP growth target of around 5%.
The stimulus measures launched in late 2008 brought a new set of persistent problems, including industrial overcapacity, heavy debt burdens for local governments, overreliance on the property market and rampant risks in the financial system.
A strong proponent of fiscal stimulus, Yu Yonding said moves to boost economic growth would exceed those of 2008, as the current size of China's economy has surpassed its previous size.
Regarding the proposal of another senior adviser – at least 10 trillion yuan ($1.42 trillion) in stimulus over the next one or two years through the issuance of special treasury bonds – Yu Yongding said it was “worth considering”.
“As long as a country’s economic growth rate is higher than its interest rate, its debt can still be sustained. China is not at the point where we need to worry about its financial sustainability. What we should worry about is the continued decline in economic growth,” he analyzed.
He said China does not need to worry about rising government leverage or a fiscal crisis coupled with inflation, as the world’s second-largest economy is pursuing an expansionary fiscal policy. China is now one of the best fiscally positioned countries globally, with a high savings rate, net foreign assets of nearly $3 trillion and foreign exchange reserves of more than $3 trillion.
While the government has remained silent on the specific scale of its stimulus plan, China’s Finance Ministry outlined several priorities for the near future at a meeting on Saturday, including debt relief for local governments, recapitalization of major state-owned banks and financial support for the property market.
Mr. Yu Yonding commented that the most positive message conveyed at this meeting was the one-time debt ceiling increase for local governments to swap hidden debts.
At a conference on October 8, the National Development and Reform Commission - China's top economic planning agency - made it clear that the economy will be boosted through more active government spending on infrastructure projects, with urban renewal being a top priority.
In terms of supply, expert Yu Yonding predicted that China's infrastructure investment is far from saturated because the country still needs many public service facilities such as urban drainage systems and nursing homes for the elderly. Even in the transportation sector, where China has seen spectacular growth, he said there is still demand for small seaports and airports.
Source: https://baoquocte.vn/chuyen-gia-hang-dau-keu-goi-trung-quoc-bom-manh-tay-hon-nua-de-thoi-lua-nen-kinh-te-290167.html
Comment (0)