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China's leading think tank in finance and macroeconomics - Independence. Insight. Influence.

Dec 8, 2019, 6 tweets

How can fiscal policies help stabilize the economy for #China amid economic slowdown and #trade uncertainties? It is to maintain stable growth of broad credit to stabilize aggregate demand, according to cf40 senior fellow Zhang Bin:
cf40.org.cn/uploads/ZB2019…

Broad credit is the sum of the debts of residents,businesses and governments in an economy, usually in the form of loans and bonds. Broad credit changes are not only related to the increase and decrease of debt,but also to financial asset changes, such as bank deposits and bonds.

Corporate credit growth has slowed under the pressure of structural transformation,and breakthroughs in the near future seem unlikely.Thus, government spending will be critical to maintaining broad credit growth and the country’s macroeconomic stability for a considerable period.

Special #bonds are still insufficient to support the needs of infrastructure development. It’s necessary to increase government financing for public welfare and quasi-public welfare projects.

Encouraging consumption and reducing subsidies for producers are key to improving economic structure. Subsidizing producers will not assist in balancing supply and demand. As the major problem is insufficient demand, fiscal means should be used to encourage consumption.

Local governments need to introduce a comprehensive plan to manage invisible debt as soon as possible and draw a clear line between the government and the market to ensure sustainable development.

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