BEIJING (BLOOMBERG) - As bad as China's economic dive is, the slump is even more perilous for the rest of Asia. The region stands to lose its growth patron.. Read more at straitstimes.com.
BEIJING - As bad as China's economic dive is, the slump is even more perilous for the rest of Asia. The region stands to lose its growth patron.
Even flatlining sounds optimistic when you consider the role China played nursing the region through the Asian financial crisis of 1997-1998 and the Great Recession a decade later. During the former, China was still booming, on its way to becoming the factory of the world and its biggest exporter. Investment was pouring in as membership to the World Trade Organization beckoned. During the global financial crisis, China undertook massive stimulus that buttressed regional activity.
What explains this reluctance? China turned to open-slather spending after the global financial crisis. That spree fueled a rebound and buttressed Asia, but it also saddled banks and companies with huge debts. Total debt to GDP, including the financial sector, ballooned to about 300 per cent in 2019 from about 173 per cent in 2008, according to the Institute of International Finance.
China may well end up doing more if the recovery scenarios look to be in doubt. The IMF predicts 1.2 per cent growth for the full year, rising to 9.2 per cent in 2021. Keep in mind, too, there's often a lot of padding in stimulus packages elsewhere, with tax incentives and grants included in attention-grabbing headlines. This is particularly true of Japan, where money that hasn't been distributed previously often gets thrown in.
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