China signals more stimulus as slowdown deepens

China yesterday signalled more stimulus measures in the near term as a tariff war with the United States took a heavy toll on its trade sector and raised the risk of a sharper economic slowdown.

The world’s secondlargest economy will aim to achieve “a good start” in the first quarter, the National Development and Reform Commission (NDRC) said in a statement, indicating the government is ready to counter rising pressure. Central bank and finance ministry officials gave similar assurances.

Surprising contractions in China’s December trade and factory activity have stirred speculation over whether Beijing needs to switch to more forceful stimulus measures, though most analysts believe the government is wary of steps that could heighten debt risks and weaken the yuan.

Data yesterday showed credit growth remains stubbornly weak, with several key gauges hovering around record lows despite months of policy easing.

“Further economic stimulus measures will be needed. The authorities seem to be taking their time to deliver this, perhaps chastened by the overkill of their stimulus in the financial crisis,” ING economists said in a note to client. “The eventual package may be very substantial.”

Some analysts believe China could deliver 2 trillion yuan (Dh1 trillion) worth of cuts in taxes and fees, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.

Most, however, expect the fresh stimulus will take months to start feeding through the world’s second-largest economy, with a turnaround not expected till spring or summer.

China’s growth slowed in 2018 as a years-long campaign to reduce a mountain of debt and crackdown on riskier lending practices pushed up borrowing costs, dampening investment and hurting domestic demand.