China’s Stimulus Tops $5 Trillion (~30% of GDP) and Lifting Lockdown Gradually


China’s plans to bolster growth as Covid outbreaks and lockdowns crush activity will see a whopping $5.3 trillion pumped into its economy this year.


The figure - based on Bloomberg’s calculation of monetary and fiscal measures announced so far - equates to roughly a third of China’s $17 trillion economy, but is actually smaller than the stimulus in 2020 when the pandemic first hit. That suggests even more could be spent if the economy fails to pick up from its current funk - a possibility raised by Premier Li Keqiang.


A $5.3 Trillion Boost

Beijing is pumping more into the economy than 2021, but less than 2020

Source: People's Bank of China, Ministry of Finance, government work reports, Bloomberg estimates Note: The budget spend for 2022 is a target figure.


Bloomberg’s calculation of financial support pledged so far for 2022 amounts to 35.5 trillion yuan. On the fiscal side, Bloomberg added China’s general budget expenditure with the amount of money issued through local government special bonds and tax and fee cuts. Monetary policy support includes hundreds of billions of yuan in liquidity unleashed by the People’s Bank of China through policy loans, cuts to reserve ratios for banks, as well as cheap loans to help small businesses and green projects during the pandemic.


Stimulus Breakdown

China has pumped tens of trillions of yuan into the economy in recent years

Source: People's Bank of China, Ministry of Finance, government work reports, Bloomberg estimates

Note: 2021 and 2020 figures are total of each entire year; 2022 data reflects announcements so far; 2022 PBOC small business tools figure is an estimate for the whole year based on first quarter data


The world’s second-largest economy has come under immense pressure to meet the government’s growth target of about 5.5% for the year. As Shanghai and other cities and regions locked down this spring to contain Covid outbreaks, industrial output and consumer spending sunk to the lowest levels since early 2020.


The fact that most of the stimulus was announced at the annual session of the National People’s Congress in early March, well before most of the lockdowns, suggests that authorities may announce more measures as needed this year. However, the central bank is likely to move cautiously, wary of diverging too much from hawkish policies elsewhere to combat runaway inflation, or repeating a strategy akin to its response to the 2008 financial crisis, which led to soaring debt.


Shanghai Takes Biggest Steps Toward Reopening in Two Months


Shanghai will let people in areas deemed low risk for Covid-19 move around the city freely and resume road and public transportation from Wednesday, in a major step forward in its efforts to dismantle a bruising two-month lockdown.


Taxi and ride hailing services, as well as private cars, will be allowed onto roads in low-risk areas, while bus, subway and ferry services will also resume, the municipal government said in a statement on Monday. Millions of people will also be able to leave their housing compounds and neighborhoods freely -- without the limited time passes or activity restrictions previously in place -- although restaurant dining-in is still banned.


Shanghai residents reacted to the news with cheers and songs from their apartments, with some setting off fireworks from their balconies to celebrate. Social media platforms, including WeChat, were flooded with messages and comments about the easing, with people discussing where and when they would meet for drinks or meals.


Nationwide, China reported fewer than 100 infections for Monday (30 May), the first time since March 2 that the country has managed to suppress cases to such a low level. Beijing is also seeing a declining caseload, with 18 new Covid infections reported for Monday (30 May). The capital, which avoided a full lockdown, has started easing some curbs on movement and resumed some public transport.

 

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