Stimulus spending by the People’s Bank of China

This report analyzes China’s latest stimulus package of 10 trillion yuan (approximately $1.4 trillion) announced in late 2024, aimed at addressing economic stagnation, real estate instability, and local government debt. Drawing on lessons from previous interventions in 2008 and 2020, it explores the economic and geopolitical implications of this initiative.

Key measures include monetary easing, lowering reserve requirement ratios, and targeted real estate policies such as reduced mortgage rates and down payment requirements. The government also introduced refinancing plans to address municipal debt, estimated at 14 trillion yuan, and implemented programs to stabilize capital markets. These actions aim to revive growth, stimulate consumer spending, and stabilize key sectors.

The report identifies potential benefits, including bolstered infrastructure spending, increased demand for raw materials, and enhanced global trade ties. However, challenges remain, such as rising public debt, risks of structural imbalances, and mixed investor sentiment. Foreign Direct Investment (FDI) declined in 2024 despite slight improvements tied to the stimulus.

Domestically, the measures aim to stabilize the real estate sector, generate jobs, and reduce inflation, though low-income households and high unemployment pose hurdles to stimulating broader consumption. The report concludes that while the stimulus provides short-term relief, its long-term effectiveness depends on addressing deeper structural and fiscal reforms.

See the full report in the link below!

Chinese Stimulus.pdf

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Credits:

Jeremy Lorge - Team Leader

Vincenzo Damiani

Coralie Dumas

Leonardo Biffi

Kayla Wyngaard