Xi Jinping’s economic adrenaline shot is only buying China a little time
Pan Gongsheng unleashed one of the country’s most daring policy campaigns in decades.
In what amounts to a massive adrenaline shot for an economy on the cusp of a deflationary spiral, the governor of the People’s Bank of China and other top financial officials unveiled a series of easing measures that market watchers had wanted for weeks at a rare, high-level press conference on Tuesday in Beijing. They include interest rate cuts, more cash for banks, bigger incentives to buy homes and plans to consider a stock stabilization fund.
Markets on the mainland and in Hong Kong soared, with the CSI 300 Index — a benchmark of onshore Chinese stocks — posting its biggest gain since July 2020. US equity futures advanced and European stocks climbed on the back of sectors with heavy exposure to China, including manufacturers of automobiles and luxury goods.
The market reaction to the policy blitz suggests that Pan, a technocrat who spent time at Harvard and Cambridge, has bought the Chinese economy some precious time. Yet economists believe this is just a down payment if President Xi Jinping is going to pull the roughly $18 trillion economy out of a protracted slump marked by a property market blowout, consumer price weakness and rising global trade tensions.
“I don’t think it’s enough to address the underlying issues behind China’s movement towards the deflationary spiral,” said Duncan Wrigley, chief China economist with Pantheon Macroeconomics. What China needs, he added, is “a package of reforms to fundamentally
