Will China's 2024 macroeconomic policies be effective, strong enough?
Published: Jan 18, 2024 10:23 PM
Illustration: Tang Tengfei/Global Times

Illustration: Tang Tengfei/Global Times

Bloomberg published an article on Wednesday with the headline "China Downplays Big Stimulus in 2024, Testing Investor Patience," adding fuel to the heated debate about China's measures to boost its economy. But does China need a "big stimulus" to support an economic rebound?

With 1.4 billion people, China has an economic landscape that is uneven and complex. When it comes to macroeconomic policies, we should first see the whole picture of China's economic reality. Despite external pressure and internal difficulties, China's economy grew 5.2 percent in 2023, successfully meeting the annual target and in line with market forecasts. On a quarter-on-quarter basis, the economy grew 1 percent between October and December, the sixth consecutive quarter of increase. It showed China's economy is on an upward trend.

Difficulties and challenges cannot be ignored. For instance, investment in real estate development fell by 9.6 percent year-on-year in 2023. The government is aware of the problems the economy faces and has rolled out measures to support a rebound. This is clearly reflected in government policy and last year's Central Economic Work Conference, which set the tone for this year's economic growth.

It was emphasized at the meeting that it is imperative to strengthen counter-cyclical and cross-cyclical adjustments of macroeconomic policies, and continue to implement a proactive fiscal policy and a prudent monetary policy. 

It pointed out that proactive fiscal policy should be appropriately strengthened, while prudent monetary policy should be flexible, moderate, precise and effective.

In China, many believe that further policy easing will continue but a "big stimulus" is unlikely in 2024. The economy indeed faces challenges, but the risks that it faces do not change the fundamentals or the long-term positive trend of China's economic development. Given the current situation, it wouldn't be prudent to adopt "big stimulus" policies in exchange for short-term growth at the cost of accumulating long-term economic risks.

We don't need to print money excessively, raise the deficit too far or pursue a massive "flood-like" stimulus. But this does not mean that China's macroeconomic policies will be feeble or even powerless. 

"Big stimulus" usually refers to measures that can strongly boost GDP growth in the short term but have serious side effects. Beyond "big stimulus," we have developed an effective and flexible toolbox to tackle multiple economic challenges. In 2024, it is believed China's macroeconomic policies will be effective and strong enough to keep growth within a reasonable range.

Unlike some developed economies that are experiencing stubborn inflation, China's inflation has stayed at low levels. In recent years, China has insisted on implementing steady macroeconomic policies, leaving sufficient policy space in reserve to cope with new challenges. It creates favorable conditions for China to adopt a more flexible monetary policy, including interest rate cuts, to boost the economy.

Recent days have witnessed a new wave of criticism about China's economy. It peaked when some Western media outlets distorted the truth and attacked the Chinese economy at a time when China released its GDP figures for 2023 on Wednesday. The risks facing the Chinese economy and its financial system have been exaggerated. 

It is precisely because of an exaggeration of economic risks that some Westerners believe that China needs "big stimulus" to support an economic rebound. In some people's eyes, if China does not adopt strong stimulus policies, this will mean that China's macroeconomic policies are not strong enough to address the problems and challenges faced by the economy. How absurd that is. 

Over the years, some Westerners have constantly tried to find fault, or even set confidence traps, in an attempt to smear the Chinese economy. They first create false and unreasonable expectations for the economy, and then maliciously spread pessimistic views when the economy fails to meet their expectations. It seems that China's macroeconomic policies have become a target this time.

Constant changes in China's economy mean that macroeconomic policies will continue to be adjusted, but one thing is clear: China will formulate macroeconomic policies according to its own needs, regardless of Western media outlets' noise about "big stimulus" and confidence traps.

The author is a reporter with the Global Times.