China Should Seize Control of the Economic Narrative
Hopes for big fiscal stimulus were far too high. Beijing is discovering that managing expectations is key to successful policy.
Stimulating demand.
Photographer: Qilai Shen/BloombergThe stimulus unleashed by the People's Bank of China last month was a tough act to follow. When it was the turn of the finance ministry to describe its role in boosting the subpar expansion, investors fretted about the absence of fireworks and demanded something more. The risk is that in not consistently exceeding expectations, Beijing will be depicted as not particularly serious about a major reboot of its economy.
Finance Minister Lan Fo'an conveyed a solid, if unspectacular, message on Saturday: More support will be forthcoming for the troubled real estate industry, government borrowing will likely be stepped up and assistance given to local authorities struggling with high debt. These are worthy undertakings that certainly won't hurt, but more significant moves were anticipated. Prior to the weekend, analysts expected the deployment of as much as 2 trillion yuan ($283 billion) in new measures, according to a survey by Bloomberg News, along with some initiatives to lift consumption. Lan provided no price tag and little by way of something fresh. Stocks fluctuated on Monday.