Commentary
For much of the past 10 to 15 years, the Chinese economy followed a familiar boom and bust pattern, even if the official GDP data was suspiciously straight.
Central government authorities would flood the market with fiscal and monetary stimulus until activity began to run too hot and then tighten money. Authorities engaged in this financial engineering to drive economic growth to elevated target levels while always trying to smooth out the risks in either direction. With an economy even with official data barely growing and the market anticipating a boost, why isn’t China stimulating?
Even relying strictly on official data, the Chinese economy is facing maybe its most challenging period this century. Local government revenue is collapsing, with government revenue drops of more than 20 to 40 percent in some places. Banks have been best by protests withholding deposits and mortgage holders refusing to pay. While developers grab the headlines, companies across China face profound challenges in repaying their debt from over-leveraged balance sheets and activity shutdowns due to the COVID-19 pandemic. So why hasn’t China pumped money into the system to stimulate growth?…