"Need for 2320 Trillion" Surge in Demand for China's Economic Stimulus Measures

Demand for Large-Scale Stimulus... 4 Trillion → 10 Trillion → 12 Trillion Yuan

As the red light turns on for China’s economic growth target of 'around 5%', experts are increasingly calling for larger stimulus measures. Some even argue that support amounting to as much as 12 trillion yuan (approximately 2,320 trillion won) is necessary.

According to the South China Morning Post (SCMP) on the 21st, Zhang Bin, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences and an advisor to the Chinese government, recently stated in a webinar that a 12 trillion yuan stimulus package will be needed next year through new government debt issuance such as national bonds, local special-purpose bonds, and off-budget national bond sales. He said, "Government spending is a variable that can quickly change the situation in the short term."

Aerial view of Yantai Port, Shandong Province, China [Image source=AFP Yonhap News]

Deputy Director Zhang said that previous policies were insufficient to solve the demand shortage problem, explaining, "It is not because there was a problem with the policies, but because they were not strong enough." He added, "If the government does not act, the downward trend in the economy will accelerate. The earlier the action, the lower the input cost and the easier the success."

He further explained that if the economic growth target for next year is 5%, the annual growth rate of government spending should be over 7%, and to achieve this, new government debt exceeding 12 trillion yuan is required.

Recently, Chinese authorities have signaled a large-scale stimulus package despite bearing the debt burden. Although the specific scale has not been disclosed, a series of press conferences have hinted at an expansion of government spending.

Chinese experts are also calling for large-scale support measures. Liu Xiangshi, director of the Chinese Academy of Fiscal Sciences and a member of the Chinese People's Political Consultative Conference (CPPCC) under the Ministry of Finance, argued in an SCMP interview on the 18th that a stimulus package of 10 trillion yuan (approximately 1,933 trillion won) is necessary. Prior to this, Yu Yongding, a former monetary policy committee member of the People’s Bank of China and an academic committee member of the Chinese Academy of Social Sciences, urged for a stimulus exceeding 4 trillion yuan (approximately 773 trillion won) that was injected during the 2008 global financial crisis.

The Chinese economy is facing difficulties due to Western sanctions and trade disputes targeting strategic industries by the United States and the European Union (EU), accumulation of local government debt, real estate market downturn, and contraction in domestic demand, investment, and foreign direct investment (FDI). According to the National Bureau of Statistics of China, the economic growth rate recorded 5.3% in the first quarter this year but declined to 4.7% in the second quarter and 4.6% in the third quarter. Analysts say that achieving the annual growth target of 'around 5%' is uncertain.