Apr 24, 2019

Why China's stimulus isn't all good

Dion Rabouin, author of Markets

Chinese President Xi Jinping. Photo: Antonio Masiello/Getty Images

China's fiscal and monetary stimulus measures have been credited with turning around the country's economy and perhaps underpinning a rebound in European and global trade this year by high-minded economists, including at the IMF.

Why it matters: The congratulations may be a bit premature, a new report from the OECD suggests. While the stimulus has helped improve economic data, China has worsened a problem that was already "excessive and unsustainable."

  • "Faced with a dampening of domestic demand and export orders, the authorities have resorted to stimulus measures involving taxes, access to credit and infrastructure investment. The stimulus risks increasing once again corporate sector indebtedness and, more generally, reversing progress in deleveraging."

What they're saying: Ed Yardeni, president and chief investment strategist at Yardeni Research, points out that while China's headline numbers look good, the growth in GDP is increasingly a direct result of fiscal stimulus.

  • "We question the sustainability of the Chinese government's initiatives. But they seem to be successful at maintaining some economic momentum for now."

Go deeper: Stimulus measures boost China's first quarter GDP growth

Go deeper

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Illustration: Sarah Grillo/Axios

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  2. U.S.: Total confirmed cases as of 3 p.m. ET: 1,820,523 — Total deaths: 105,644 — Total recoveries: 458,231 — Total tested: 17,340,682Map.
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  4. Public health: Protests against police brutality threaten coronavirus response — Controlling the virus in nursing homes won't be easy.
  5. Business: More than 1 in 6 black workers lost jobs between February and April.
  6. Media: Interest in the George Floyd protests has soared past the coronavirus.
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Police officers wearing riot gear push back demonstrators outside of the White House on Monday. Photo: Jose Luis Magana/AFP via Getty Images

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The latest: Immigration agents have been deployed to assist federal, state and local law enforcement. The U.S. Secret Service closed the streets immediately on all four sides of the White House Tuesday, until "riots become peaceful, or stop."

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Illustration: Eniola Odetunde/Axios

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