Editorial | Incremental measures seen as the best way forward for economy
- China’s decision makers remain confident they can still turn things around in the longer term. A stable way forward is better than resorting to a ‘shock-and-awe’ option with its uncertain fallout
China is getting bad press in the West for its economic performance, with the focus on property market woes and weak investor and consumer sentiment. This has prompted Beijing’s envoy to Washington, Xie Feng, to pen a newspaper article citing positive data and growth projections by the International Monetary Fund, World Bank and Organisation for Economic Co-operation and Development.
Statistics can be used to bolster any argument but, in this case, they background the latest incremental steps by the central bank and state lenders to boost investment and demand for property. These measures should be seen as part of a package with others.
The cut in mortgage interest rates will add little to household income or do much to stimulate purchases of homes. But, together with a raft of other incremental measures, they signal an intention to stimulate the housing and property industries by removing, step by step, a lot of regulation put in place in recent years. The target is consumer confidence. The impact on demand remains to be seen.
Faith in incremental measures may leave many observers unconvinced that Beijing is doing enough to boost a weak recovery from the Covid-19 slowdown. They expect a big and bold rescue plan.
But Beijing believes the main issue for the economy now is confidence, and that the real challenge is to strike a balance between stability in the long term and restoring positive sentiment now.
That, hopefully, includes weaning itself off debt-fuelled growth. Instead of a return to the Wen Jiabao era of massive quantitative easing, the government is relaxing overall control through administrative and regulatory measures – such as marginally lower short-term interest rates – in the hope of improving sentiment.
