China may need unconventional stimulus measures to cope with effects of trade dispute with US

By Hu Weijia Source:Global Times Published: 2018/8/8 22:53:42

Unconventional methods may be needed to cope with effects of bilateral trade dispute

Wednesday is the 10th anniversary of the opening ceremony of the 2008 Beijing Olympic Games, which left Chinese people with memories of exciting moments in what turned out to be a really tough year.

That was the year in which the Chinese government announced a 4 trillion yuan ($585 million) stimulus package to fight the impact of the global financial crisis and keep shocks from damaging the Chinese economy.

Unveiled by the State Council, China's cabinet, in November 2008, the two-year spending initiative had long-lasting effects not just on China but also the global economic governance system. Critics of the stimulus plan have blamed it for causing surges in Chinese debt and overcapacity, but China's development over the past decade has led most analysts to re-evaluate the package.

One decade after the global financial crisis, the international economy is once again facing uncertainty as the world's two largest economies are locked in a trade conflict. The questions are, how can we overcome the challenges and help the global economy get through its hardship?

If the global financial crisis is seen as the most important economic event in the past decade, China's stimulus package should take second place. The first few years of the 21st century after China entered the WTO saw the nation accumulate economic strength with rapid GDP growth. The 4-trillion-yuan stimulus package supercharged China's economic growth with accumulated strength.

Although stimulus spending isn't recommended by Western economists, the 2008 plan turned out to be a practical means of bolstering expansion in the Chinese economy and helping sustain global growth. China's stimulus played an important role in turning around the global economic cycle.

China has tried to reduce the negative side effects of the stimulus plan over the past decade, and it hasn't been an easy task. The nation has had a hard time curbing overcapacity and deleveraging. However, it's fair to say that the benefits the economy got outweighed the costs of the 2008 stimulus package.

The Chinese economy has been driven by a unique combination of factors that Western economists sometimes fail to explain. At times, shoring up the economy with unconventional methods is not a bad choice for China.

Amid the escalating trade conflict, some economic sectors may encounter tough times as the country is forced to fight back against the US. This doesn't necessarily mean China will repeat what happened 10 years ago, but history tells us we can look to some unconventional methods to overcome economic challenges.

The author is a reporter with the Global Times.

Newspaper headline: Unconventional methods may be needed to cope with effects of bilateral trade dispute


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