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A Makeover for Chinese Macroeconomic Policy

While China is not about to recapture double-digit GDP growth, that does not imply economic catastrophe. After four decades of rapid growth, a slowdown was inevitable, and if China readjusts its macroeconomic policy stance, it can prevent that slowdown from being excessively sharp.

BEIJING – China’s economic performance in 2018 was rather disappointing. According to official statistics, the country’s growth rate up to the end of the third quarter was 6.7%, the lowest since the global financial crisis. The real situation was probably even worse.

A lack of progress on institutional reform, together with obstacles to structural adjustment, have been fueling doubt among many foreign and domestic observers about China’s growth prospects. Some even anticipate a financial crisis, caused by a bursting housing bubble or large-scale debt defaults by local governments and corporations. The trade war with the United States only deepens such worries.

Although a slowdown was inevitable in China after four decades of breakneck growth, the Chinese government should try to stop further deceleration this year. Otherwise, China’s economic, financial, and social stability will be jeopardized. This can be achieved if the government adjusts its macroeconomic policy stance.