In the backdrop of the plummeting property market and continuing COVID lockdowns which have hurt the country’s business sector immensely, China’s intention to not provide help to citizens economically by giving out economic stimuli such as subsidies is unwavering, media reports said. It seems like China is finally facing up to the limits of economic stimulus as anxious consumers hold back from more spending or borrowing amid continuing COVID lockdowns. There are no signs that Beijing is prepared to rain serious “helicopter money” down on the public, reported Nikkei Asia in an article written by Joe Zhang, a co-chair of SBI China Capital Group in Hong Kong.
He highlighted that just as amid the COVID-19 pandemic, many countries gave subsidies to companies to retain staff and paid cash to citizens to ease the economic pain, China turned away its head in doing the same, reported Nikkei Asia. It is worth noting that while three weeks ago, the State Council announced a package of 19 measures to support the economy which had a value of the infusion of funds at 1 trillion yuan ($143.7 billion), it is still a far cry from the 4 trillion yuan of stimulus spending Beijing unleashed during the global financial crisis in 2008 when the country’s economy was only about one-third the size it is today. China’s lockdowns and transport restrictions have hurt small and midsized businesses. Most property developers report seeing little benefit from the policy announcements of recent months while their sales have kept shrinking.
As per observers the true debt level of local government can be opaque and is likely far bigger than official statistics would have believed. State-owned enterprises (SOEs) have been acquiring failing private competitors of late. Even in the real estate sector, troubled private developers have been selling off assets to state-owned rivals over the past year.
During the World Economic Forum in July Chinese Premier Li Keqiang in a speech to global business leaders said that the government would avoid “flooding the market with stimulus.” The implication is that the authorities are weary of the same old playbook after four decades. For the government, there is now profound doubt about the desirability of credit as a development strategy and soul searching is underway in the bureaucracy. Add to that, the bursting of the property bubble and the collapse of hundreds of thousands of businesses in the past year. Then there is a crisis stemming from loans gone bad to countries participating in China’s Belt and Road Initiative, an issue causing international embarrassment in places like Sri Lanka.