Global RiskNews Briefs

Why China Is Withholding Stimulus Amid Coronavirus-Sparked Downturn

China’s economy has been severely impacted by the COVID-19 pandemic that caused Chinese cities to go into lockdown for over two months in some cases. The country suffered its first quarter of economic contraction since the 1970s, with millions of jobs lost and businesses closing. However, China has not yet issued any stimulus packages like other large economies such as Japan and the US. Chinese authorities have instead focused on administrative efforts such as tax cuts and pressure on landlords to forgive rents.

Beijing has released liquidity into the financial system, allowing local governments to start projects on infrastructure. Despite the poor outlook of China’s economy and the global recession that could cripple its export sector, Beijing has not yet spent a significant amount on infrastructure or cut lending rates. Chinese authorities reportedly expressed concern that a stimulus push could deepen economic risks, especially in the property market where decades of unbroken price increases have convinced Chinese citizens that real estate is a haven investment.

OODA Analyst

OODA Analyst

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