Diana Choyleva
About the author: Diana Choyleva is chief economist at Enodo Economics and a senior fellow at the Asia Society Policy Institute’s Center for China Analysis.
Beijing has just fired an economic salvo that’s reverberating through global markets. Make no mistake, this is not your garden-variety stimulus package. China is fundamentally realigning its growth strategy. That demands the undivided attention of every serious investor.
The prevailing China narrative in the West has been one of inevitable decline. The sense that we were witnessing “peak China” has given way to the notion that “China is the next Japan.” But those writing off the world’s second-largest economy may soon find themselves on the wrong side of the story. Beijing began to roll out stimulus measures in late September. These bold move aims to tackle deflation and anemic consumer demand head-on, while simultaneously countering the headwinds of continued U.S. decoupling pressures.
The sheer scale of this economic overhaul is notable. With more fiscal firepower on the way, the overall size of the stimulus package is likely to range from 4 trillion to 12 trillion yuan. That’s equivalent to about $561 billion to $1.7 trillion, or a whopping 3.2% to 9.5% of China’s gross domestic product. But here’s the kicker: the real game-changer lies in the intangible effects this stimulus will have on consumer and business confidence, and on the system’s renewed capacity for innovation. These factors, while hard to quantify, could be the rocket fuel that propels China’s economy to new heights.
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