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Ambrose Evans-Pritchard: Groundswell builds for massive Chinese stimulus but today wasn't real thing
By Ambrose Evans-Pritchard
The Telegraph, London
Tuesday, September 24, 2024
China urgently needs a stimulus of shock-and-awe proportions, backed by a deep cleansing of its broken banks along the lines of America's "TARP" (Troubled Asset Relief Program) rescue in 2008. The latest package announced today falls far short.
The drumbeat for radical action is by now deafening. It dominated the weekend's China Macroeconomy Forum in Hong Kong, where a chorus of influential voices called for a fiscal blast of up to $1.4 trillion to pull the country out of debt deflation and cosmic gloom.
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Liu Shijin, a former rate-setter at the People's Bank of China, said the government should issue special bonds worth 8% of GDP to boost social spending, pensions, and health care. And to convert the galactic glut of unsold flats into homes for the 180-million-strong army of migrant workers caught in the no-man's land of the semi-feudal Hukou system.
Mao Zhenhua, co-director of the Renmin Institute of Economic Research, wants a similar package of $1.4 trillion -- or 10 trillion yuan -- proposing direct cash transfers to citizens akin to Covid cheques in the West.
The authorities have been dribbling out stimulus for months but it has been too half-hearted to arrest the slide into a Keynesian liquidity trap. Disappointing data over recent weeks have finally caused the dam to break. The PBOC cut the reserve requirement ratio by 50 points today. There were targeted measures to prop up the crumbling housing market.
Raymond Yeung, China strategist at Australia's ANZ bank, said the measures will inject a trillion yuan into the banking system but do not add up to a genuine bazooka. "We question whether today's package can lift China from the deflationary spiral. Massive easing and a complete change in mindset are required," he said. ...
... For the remainder of the report:
https://www.telegraph.co.uk/business/2024/09/24/groundswell-building-for-massive-chinese-stimulus/
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