China Has a Dirty $1 Trillion Stimulus Secret
Another economy-boosting infrastructure binge is afoot, but you won’t find it reflected in the fiscal deficit target.
The oldest trick off the book.
Photographer: China Photos/Getty Images
Investors trying to gauge how much appetite China has for stimulus should ignore official targets and look at local government bond issues instead.
Premier Li Keqiang set a 2019 GDP growth target of 6 percent to 6.5 percent at the National People’s Congress on Tuesday, down from “around 6.5 percent” in 2017 and 2018. While Beijing’s targeted fiscal deficit of 2.8 percent is higher than last year’s 2.6 percent, billions will be going to cuts in personal-income and value-added taxes instead of on infrastructure projects. Tax cuts work like ayurvedic medicine — it may be years before real benefits are seen. Hardly thrilling, is it?