China: Economic stimulus measures showing first effects

China’s economy seems to have fallen back into step. Economic growth stabilized at 6.4% at the beginning of the year. This comes as a positive surprise. Above all, the very dynamic acceleration of industrial production in March by three percentage points to 8.5% signals that the economic stimulus measures initiated by the Chinese government in recent weeks are having an effect. State investment activity and investment in infrastructure have also picked up.

Clearly problematic is that we are once again seeing the „old“ stimulus packages with the typical longer-term risks to financial stability and potential growth. The OECD has only recently warned Beijing of this. On the other hand, the boost to private consumption thanks to the VAT reduction from 16% to 13% is to be welcomed. It should also prove conducive to spurring demand for automobiles which has fallen sharply. However, there are still no visible signs of this having an effect.

It is still clearly too early to herald the turnaround for China’s economy. In the months ahead, we shall have to wait and see how sustainable the hastily launched fiscal stimuli are. The growth spurt could well run out of steam again in the further course of the year. Exports are also likely to remain weak for the time being. For even if China and the USA are heading for an agreement in the trade dispute, we are unlikely to see a swift and complete end to the punitive tariffs. But today’s figures from China do indeed signal hope for an approaching end to the stagnation of global growth.

Rate this article


Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 0

Leave an answer

Your e-mail address will not be published. Required fields are marked *