From CNBC: 2024-09-22 23:17:41

Local residents in Beijing faced rain during their morning commute on September 20, 2024. Economists are calling for China to stimulate growth by issuing $1.42 trillion in ultra-long government bonds for investment in human capital. Despite challenges, Goldman Sachs reduced China’s growth forecast to 4.7% due to slower manufacturing growth and real estate woes.

The property slump continues in China, with related investment down over 10% for the first eight months of the year. Policy needs to stabilize the property market at a larger scale, around 3 trillion yuan, versus the 300 billion yuan announced so far. Policymakers should consider bailing out property owners to restore confidence.

China’s focus on advanced manufacturing and technology is a priority for top leaders in the face of growing U.S. restrictions. Former People’s Bank of China governor Yi Gang emphasized the need to fight deflationary pressure with fiscal and monetary policy. Local governments face constraints on infrastructure investment, potentially signaling a second wave of economic shocks.

Slower-than-expected growth in retail sales, industrial production, and fixed asset investment highlights the challenges for China’s economy. The PBOC left a key rate unchanged despite expectations for monetary easing after a U.S. rate cut. Beijing may need to ramp up transfers to local governments to alleviate fiscal burdens and stabilize the property market.

Read more: China stimulus calls are growing louder, at home and abroad