China needs to spend up to Rmb10tn ($1.4tn) over two years in stimulus funds to reflate its economy and return it to sustainable growth, investment bank economists said, as concerns grow that deflationary pressures are becoming entrenched.
The stimulus, which would be up to 2.5 times the “bazooka” package China enacted after the global financial crisis in 2008, would need to directly target households through social welfare spending rather than investment and infrastructure, they said.
They warned that the matter was becoming more urgent — the more embedded deflation became, the more it would cost to dispel it through stimulus measures. Their estimates underline the scale of Chinese policymakers’ challenge as they try to reinvigorate growth in the world’s second-biggest economy.