Findlay Nicolson analysts warn that China’s economy needs ongoing stimulus measures to stabilize.
Although Findlay Nicolson economists had predicted that China’s economy would be hit harder than the US by the bitter trade skirmish which had raged on for the better part of last year, the worse than expected slowdown seen in the final quarter of last year caused widespread concern throughout global markets.
Ten years ago, China played a crucial role in helping the global economy emerge from the devastating financial crisis but Findlay Nicolson economists have warned that the opposite could now occur. Investors are now also concerned that China could drag the world’s economy into another recession.
The disappointing GDP results prompted Chinese policymakers to implement a range of stimulus measures in a desperate effort to support the world’s second largest economy.
State run banks have been encouraged to increase lending. The People’s Bank of China reduced interest rates to make credit more easily accessible to private companies, while the government injected billions of dollars into the struggling economy.
These stimulus measures seemed to have achieved the desired result when China reported a GDP growth of 6.4% in the first quarter of this year, exceeding the expected growth of 6.3%.
China’s hefty debt burden is a persistent concern for Chinese policymakers who may want to ease off on fiscal stimulus before the economy has stabilized.
And while the better than expected Q1 growth might tempt policymakers to scale back on stimulus measures, Findlay Nicolson economists say it is unlikely that China’s economy will continue to stabilize without it.