China Lays Out Another Mini-Stimulus

THE LATEST ROUND of measures to boost growth show how fine a line China’s economic policymakers are walking. Tax cuts, spending on transport infrastructure along the Yangtze River and easier financing for exporters come after the unexpected fall in imports last month pointed up the persistent weakness in domestic demand. They also follow a previous mini-stimulus in April when the government announced tax cuts for small businesses and the acceleration of the construction of new railway lines. Fiscal spending in May rose by 25% over the same month last year.

While the slowing of the economy overall is a necessary consequence of efforts to rebalance it, and inevitable after three decades of double digit growth, the rate of deceleration has to be carefully managed to keep employment levels up while at the same time not re-inflating any asset bubbles. If GDP growth comes in at its forecast 7.3% this year, that would be its slowest rate of annual growth since 1990, and fast approaching the point that is as far from the official annual growth rate target of 7.5% that the leadership would still be comfortable with describing as “about 7.5%” growth.

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