Making Sense of China’s Fiscal Flurry

Beijing is again turning to fiscal stimulus to stabilize the economy, unveiling a slew of new funding channels for local government-led infrastructure investment. These new plans total around 1% of GDP relative to budgeted levels earlier in the year, and should be more successful in actually boosting infrastructure spending than in 2020 and 2021.

However, there are no signs of a pickup in actual spending so far, and even a double-digit surge in infrastructure investment cannot offset the impact of declining property construction this year. Overall investment growth is still likely to be negative for the year, given the disruptions to the economy from COVID restrictions in Q2. Over the longer term, Beijing risks rolling back some of its hard-won discipline over local government spending and debt for limited short-term gains.

Posted July 11, 2022
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