Will China’s first-half GDP data reveal need for more fiscal stimulus?
Economists say rising external uncertainties linked to trade war with US could prompt more proactive fiscal policy
Analysts awaiting details of China’s economic performance in the first half of the year, which are due to be released on Tuesday, will be looking to see whether more fiscal stimulus is needed to weather the tariff storms emanating from Washington.
While the market largely expects second-quarter economic growth to reach 5 per cent, in line with the full-year target, concerns linger that the rosy headline figure could mask persistent weakness in domestic demand and employment.
On top of these structural challenges at home, rising external uncertainty – particularly amid shifting US trade policy – has emerged as a pressing concern, prompting many economists to call for stronger fiscal support.
“In the second half of the year … the economy will remain under intense external challenges and shocks,” economists led by Lian Ping, chairman of the China Chief Economists Forum, said in a note issued on Wednesday.
“Achieving the full-year growth target will not be easy, and will require more forceful, innovative, wide-ranging and targeted policy measures,” they wrote, citing the pressures on the domestic economy stemming from the trade war with the United States.
Similarly, central bank adviser Huang Yiping said during a panel discussion at the World Economic Forum’s Annual Meeting of the New Champions in Tianjin last month that he “would be very much in favour of a proactive fiscal policy” if external uncertainties were to trigger a downturn in the domestic economy.
“What we see at the moment is rising uncertainties,” he said. “We are very much worried about deglobalisation, trade, protectionism and so on.”
The next bilateral talks are planned for early next month, when a 90-day tariff truce expires, US Commerce Secretary Howard Lutnick told CNBC on Tuesday.