Yu Yongding Calls for Stimulus

Caixin: Yu Yongding: China Needs Stimulus

This approach is misguided. While structural adjustment is crucial, slower economic growth is not a prerequisite for success; on the contrary, it would impede reform. Moreover, given that the complexity of China’s labor market impedes data collection, it is likely that China’s employment situation is not as strong as many believe.

In this context, the Chinese government’s top priority should be to arrest the decline in GDP growth — not least to prevent a kind of snowball effect that will make restoring growth far more difficult later. After nearly a decade of continuous deceleration, with no end in sight, investors and consumers are becoming increasingly reluctant to spend. Serious financial vulnerabilities will only deepen their concerns; ceteris paribus, declining growth will worsen all indicators of financial stability.

...China has the policy space to implement a powerful economic stimulus package. While the side effects and limits of such a package should be fully recognized, the risks of a continued slowdown — not only for China, but also for a global economy primed for recession — dictate that the government should use it.