The writer is chief economist of JD Group China’s latest fiscal stimulus package aims to address the problems of the country’s local government debt held off balance sheets and lay the foundation for sustainable growth. But the market’s reaction — from a sharp drop in the renminbi exchange rate to a slump in Hong Kong’s Hang Seng index — suggests that strong doubts linger over whether this Rmb10tn plan goes far enough. The scepticism is widespread.
“It only helps the government, not businesses or households” Another concern is that the package only addresses government debt issues, leaving businesses and households on the sidelines. Yet local governments’ financial constraints have hit both these groups significantly. Years of tight budgets have led to cuts in public investment and social services, payment delays for infrastructure projects and even deferred salaries.