Opinion | China is risking economic stagnation with its half-hearted stimulus measures

Japanese Prime Minister Shinzo Abe recently announced the launch of a US$121 billion stimulus package, but China is still hesitating to do something similar. As a result of the global economic slowdown and weakening domestic demand, China’s GDP growth rate fell to 6 per cent in the third quarter of this year, the lowest since records began in 1992. Markets are worried that the world’s second-largest economy – a major contributor to the global GDP – might continue to decelerate.

Should China allow its growth rate to slide below 6 per cent in 2020? The question is complicated, but I believe it is absolutely crucial to maintain a slightly higher growth rate for now, simply because once the economy decelerates, it may not be able to recover for a long time.

China’s economic growth has been falling gradually for almost 10 years. It is vital to reverse the trend to ensure healthy and sustainable growth in the longer term. In light of its major accomplishments in the past few decades, while it is still a developing country, China has great potential to narrow the gap with advanced economies. Its annual per capita nominal disposable income in 2018 was only a little over US$4,000, or less than 10 per cent that of the US.

There have been several examples of economic policy slippage. For instance, the late and insufficient adjustment of the one-child policy accelerated population ageing and affected the nation’s population structure. So, if China wants to maintain growth at above 6 per cent in the next few years, it is necessary for the government to take action now.