China expected to implement more economic stimulus despite growing debt and weak yuan

Gross domestic product growth slid from 6.4 per cent in the first quarter to 6.2 per cent in the second quarter of 2019, the lowest since records began in 1992

To shore up growth and meet the projected 6 to 6.5 per cent expansion target for 2019, economists and analysts expect China to lean on fiscal measures

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To shore up growth and meet the government’s 6 to 6.5 per cent expansion target range for this year, economists and analysts expect China to lean largely on additional fiscal measures in the second half of the year. Photo: Bloomberg

Published: 10:00pm, 19 Jul 2019Updated: 3:40pm, 22 Jul 2019

China is likely to implement more economic stimulus policies in the second half of the year to steady growth even though this will further increase already high debt levels and put downward pressure on the yuan exchange rate, according to economists and analysts.

Growth fell to a record low of 6.2 per cent in the second quarter of 2019, down from 6.4 per cent, reflecting not only the shock from the protracted trade war with the United States but also the difficulties Beijing is facing in resolving long-standing economic structural issues.

To shore up growth and meet the government’s 6 to 6.5 per cent expansion target range for this year, economists and analysts expect China to lean largely on additional fiscal measures in the second half of the year, though it could also ease financial costs to boost lending.

In the short term, there is still room for China to cut benchmark interest rates and taxes to help manufacturers and small to medium-sized enterprises, according to Zhang Jie, a professor with Institute of economic research at Renmin University of China in Beijing.

Zhang suggested the government could consider a targeted tax cut for hi-tech manufacturing firms if growth slowed further, but such a move would take some time to implement.