From CNBC: 2024-04-19 00:25:12

China’s fiscal stimulus may be losing effectiveness and is more about buying time for industrial and consumption policies, according to S&P Global Ratings. The analysis used government spending to measure stimulus impact. China aims for 5% GDP growth this year, despite high debt levels restricting local government stimulus efforts.

Local governments in China are facing fiscal constraints and diminishing effectiveness in stimulus efforts, leading to a focus on improving business environments and long-term growth. Investment in infrastructure slowed while real estate investment dropped further. Measures to bolster domestic demand were announced, expected to create over 5 trillion yuan in annual equipment spending.

S&P found that richer cities had bigger and more effective fiscal stimulus measures compared to poorer areas from 2020 to 2022. Higher-income cities are less vulnerable to property market declines and have stronger industrial bases. Higher-tech sectors are driving China’s industrial upgrading for long-term economic growth, despite potential short-term price pain from overcapacity.

Read more: China’s fiscal stimulus is losing its effectiveness, S&P says