Since 2023, as China’s economic recovery from the Covid-19 pandemic has shown protracted weakness, a “Peak China” theory has emerged and reached its zenith during the second and third quarter of 2024. On September 26 last year, President Xi Jinping chaired an unexpected meeting of the Communist Party’s Politburo to discuss economic work.
After the meeting, the government enacted a series of stimulus policies aimed at addressing the causes of the country’s economic downturn. This was confirmed by Premier Li Qiang at the opening of this year’s National People’s Congress (NPC) in a speech outlining a package of measures intended to help hit a growth target of around 5 per cent.
One argument from sceptics is that China’s fiscal policy has not been expansionary enough, leading to a contraction in the economy and a downward spiral in prices. However, the fiscal stimulus package unveiled at this year’s “two sessions” is unprecedented, including a 4 per cent deficit-to-GDP ratio and a government deficit of about 5.66 trillion yuan (US$782 billion), an increase of 1.6 trillion yuan from last year.
Finance Minister Lan Foan has emphasised that the central government has sufficient reserve tools and policy space to address any uncertainties. This can be understood as being able to deploy additional fiscal policy if needed and ensuring all necessary measures can be taken.
The potential for consumption among China’s local governments and public has improved significantly. On the local government side, the 6 trillion yuan debt-swap programme approved in November appears to be gaining momentum, with Lan saying during an NPC press conference that implementation had reached the halfway mark.
In the residential sector, China has seen a significant decline in debt burden, with households’ loan-to-deposit ratio falling back to early 2017 levels.
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‘Two Sessions’: China to focus on gig workers and training to tackle unemployment
‘Two Sessions’: China to focus on gig workers and training to tackle unemployment
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