Chart of the Week: China, stimulus and the NPC — better late than never

Refresh the chart in your browser | Edit the chart in Datastream

China’s plan to revitalise the economy after the impacts of COVID-19 was unveiled in the recent annual National People’s Congress (NPC). Estimates suggest the total stimulus will amount to around RMB 5-6 trillion, or $800 billion. It comes in the form of tax savings to support businesses (RMB 2.5 trillion), central government bonds for COVID-19 control (RMB 1 trillion), and an increase in special local bond issuance (RMB 1.6 trillion), with government bonds being captured in the total social financing measure represented in the chart. In value terms, this stimulus package is far larger than the bazooka we saw in response to the 2008-09 Global Financial Crisis.

However, due to the expansion of the Chinese economy, when expressed as a percent of GDP it is around half that seen in 2008-09, at around 6%. In truth, there is probably more policy easing occurring in China than implied by official announcements, as indicators such as loan write-offs have soared in recent months. The NPC also disclosed that it would not be setting a growth target for this year, and instead will focus its efforts on economic stabilisation and job creation. This is after the urban unemployment rate hit a record 6.2% in February, with Fathom’s proprietary China Urban Underemployment Indicator (CUUI) suggesting an even more dire job market.

__________________________________________________________________________________