- ORIGINAL NEWS
China’s fiscal stimulus is losing its effectiveness, S&P says
- SUMMARY
China’s efforts to stimulate its economy through government spending, known as fiscal stimulus, are becoming less effective.
According to S&P Global Ratings, this is due to high levels of debt among local governments.
Despite the government’s ambitious target of 5% GDP growth this year, fiscal stimulus alone may not be enough to achieve it.
S&P argues that it is more a strategy to buy time while the government focuses on longer-term policies to boost industry and consumption.
The report highlights a significant disparity in debt levels among Chinese cities, with some having much higher debt burdens than others.
This limits their ability to implement fiscal stimulus measures.
The government’s recent announcement of measures to bolster consumer demand, such as equipment upgrades and trade-ins, is expected to create substantial spending.
However, S&P suggests that these policies may be more effective in wealthier cities with stronger industrial bases and more resilient consumption patterns.
Ultimately, S&P believes that China needs to focus on long-term growth drivers, such as industrial upgrades and reforms to improve the business environment for businesses.
They also emphasize the importance of addressing overcapacity in certain industries, which could lead to price declines and economic headwinds.
- NEWS SENTIMENT CHECK
- Overall sentiment:
neutral
Positive
“The Chinese government earlier this year announced plans to bolster domestic demand with subsidies and other incentives for equipment upgrades and consumer product trade-ins.”
” higher-tech sectors will continue to drive China’s industrial upgrade and anchor long-term economic growth”
Negative
“China’s fiscal stimulus is losing its effectiveness and is more of a strategy to buy time for industrial and consumption policies, S&P Global Ratings said.”
“Investment is less effective amid [the] drastic property sector slowdown”