China Stimulus to Offset Negative Effect of Trade War with US

China will take steps to spur growth amid a trade war with the United States, but there is limited room for aggressive stimulus in an economy already laden with massive debts and a property market prone to credit-driven spikes, policy insiders said.

China’s deepening economic slowdown has fanned market expectations of a big spending binge, especially if the bruising tariff war with Washington escalates, intensifying pressure on Chinese jobs threatening social stability.

Such a move, plans for which have repeatedly been denied by China’s top leaders, would come at a price, however – similar moves in the past have quickly juiced growth rates but also buried the world’s No.2 economy under a mountain of debt.

“The room for a strong stimulus is not big, and there are very big risks, because that will rely on a flood of cash and increased leverage in the economy,” said a policy insider, declining to be named due to the sensitivity of the matter.

via Reuters

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