China’s Stimulus Muddle Deepens

Beijing is going to find it increasingly difficult to achieve its twin aims of cutting debt while keeping growth on track.

'Li Keqiang, China’s premier, has a few ideas for 2019: keep overall debt growth in check, cut taxes, accelerate government bond issuance, and boost lending to small businesses,' reports Nathaniel Taplin in the WSJ.

'If that sounds like a lot to ask—and contradictory—it is.

• 'Some of these goals will fall by the wayside.
• 'Getting banks to lend more to small businesses without overall credit growth accelerating will be near impossible.
• 'And significantly higher government debt sales will require more banking system liquidity to keep rates from rising and further damaging growth.
• 'That means more monetary easing: probably not a 2015-like flood, but definitely a rising tide.'

'In short, Beijing is still holding on to contradictory goals: boosting growth and formal government debt issuance while keeping overall indebtedness in check.

• 'The result is likely to be a relatively weak stimulus by past standards—although still enough to boost overall leverage—and a weak recovery, at best, some time in the second half.'

'Two Sessions' I

More articles from this issue

1. Facing slowing economic growth, China’s premier promises relief for business

2. Six key takeaways from China's annual policy blueprint

3. China’s Stimulus Muddle Deepens

4. China’s ‘two sessions’: an economic watershed or more of the same?

5. Xi Jinping Works to Stifle Dissent Amid Concerns About China’s Economy

6. FINTECH: Two Sessions Sends Strong Signals on Support for Chinese Fintech Development

7. How tea is served in the Great Hall of the People in China

8. 'Two Sessions': A rap song extolling China's annual political meeting

March 9, 2019