Thread by @ChinaFinance40

To ensure growth of 3%+, #China needs expansionary fiscal&monetary policies. CASS estimates the infrastructure investment required for imposing expansionary #fiscalpolicies amid the #pandemic will need to be way higher than the RMB 4 trillion package. By Yu Yongding at CASS

With fiscal deficits rising, many are opposed to stimulus like the RMB 4 trillion package in 2008, worrying that fiscal deficit would surge and push up government #debt. But it doesn't necessarily mean that China shouldn't take more expansionary policies than in 2009, because:

1. Its debt is much lower than many developed countries;

2. People worry about high leverage because lenders are afraid that borrowers will default and stop lending, triggering sovereign debt crisis, but that’s unlikely in China;

3. Changes in leverage depend on relative fluctuations in ourstanding national debt and GDP. China's priority is to speed up growth, not to lower leverage;

4. Although Chinese government's leverage is relatively low, that of its businesses is very high;

5. A high leverage ratio in the economy is not necessarily a bad thing.

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