Leading expert calls on China to pump more money to "rekindle" the economy

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 purse much more than the 4 trillion yuan (about 564.7 billion USD) that was released 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 continue 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.

Last weekend, China's Finance Minister announced a massive fiscal stimulus package worth over $300 billion. The continuous stimulus packages to the capital, 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 since late 2008 have 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 another senior adviser's proposal – that at least 10 trillion yuan ($1.42 trillion) of stimulus is needed in 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 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 quiet 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, capital replenishment for 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 body - 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, nursing homes for the elderly, etc. 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