An injection of spending is not the cure for China's economic recovery

safiya982

The Chinese government may also worry about the risk to financial stability and inflationary consequences. More importantly, I think Beijing policymakers understand that these economic problems are not just cyclical. Big stimuli cannot address deep-rooted structural problems. Whether it wants to or not, China is moving away from growth led by local ownership and governance, which is a painful process. Consumers lack confidence in future pension and healthcare coverage and continue to spend cautiously. Low investor confidence in the private sector is not only due to the weakness of the economy, but also the uneven playing field with state-owned enterprises (SOEs) and concerns about stricter regulation.

Make matters worse, Chinese companies are struggling with reduced access to advanced technology and disengagement from the US and its allies. China's exports and inward foreign direct investment are also feeling the Russia Mobile Number List effects of global supply chain adjustments. Quick action is now needed to combat the sharp slowdown, especially in the battered real estate sector. But instead of spending big, China should opt for a moderate stimulus package (1 to 2 percent of GDP), accompanied by concrete structural policies. These could include reducing barriers to entry and improving legal protection.



The private sector; a well-publicized increase in spending on health and social protection; and deepen hukou (household registration) reforms to increase labor mobility and purchasing power of rural migrants. While major reforms of public companies are unlikely, steps could be taken to increase efficiency and curb their monopoly.While China may disappoint a market expecting a big fiscal stimulus, this does not have to hurt its economy in the long term. A smaller government role in directing growth can lead to steeper economic cycles, but it could also help weed out inefficient market players, create more room for the private sector to develop, and increase resources for social spending. . Such a realignment of the roles of the state and the market would be welcome.