Caixin
Oct 20, 2022 07:39 PM
OPINION

Yu Yongding: Can China Stabilize Its Economy Without Increasing Central Government Debt?

A high-speed rail line under construction in Jinhua, Zhejiang province, on Oct. 15. Photo: VCG
A high-speed rail line under construction in Jinhua, Zhejiang province, on Oct. 15. Photo: VCG

When effective demand weakens, a government often looks to boost infrastructure investment to drive economic growth. The core of China’s expansionary fiscal policy is having local governments, and enterprises, especially state-owned ones, increase infrastructure investment.

However, a successful implementation of infrastructure investment and its effectiveness in stimulating China’s economic growth are subject to external conditions such as Covid-19 restrictions, and whether certain operational problems can be solved. Two major problems lie in the financing structure of infrastructure investment and the use of local governments’ special-purpose bonds (SPBs).

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Yu Yongding

Yu Yongding, a former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006.