Is China’s new stimulus a strategic pivot in policy or a short-term tactical move?
Some analysts see ‘panicking’ among China’s policymakers, others point to a rising sense of urgency in fighting deflation
By announcing a slew of bombshell measures to support the economy, Beijing is inching towards a strategic shift in macro policy amid fears of an economic free fall, according to analysts.
The announcements represented a change from policymakers’ previous approach of drip-feeding piecemeal support measures to a coordinated package of stimulus measures, the analysts added.
“We can no longer ‘squeeze out the toothpaste’,” said Zhu Tian, an economics professor with the China Europe International Business School in Shanghai, referring to the previous reluctance of Chinese policymakers to unleash large-scale stimulus.
“China’s economy is now in a serious drought situation. If we don’t release water, we will die of thirst.”
And in line with the measures unveiled a day earlier, China’s central bank on Wednesday cut the rate on 300 billion yuan (US$42.6 billion) worth of one-year medium-term lending facility loans to some financial institutions from 2.3 per cent to 2 per cent.
