Commentary: With Its Economy Sputtering Again, China Needs to Open the Fiscal Taps

China’s economic engine sputtered in July. A confluence of weakening domestic activity and mounting uncertainties abroad — highlighted by the second blockade of the Strait of Hormuz in the Middle East — makes a compelling case for urgent fiscal expansion.

Export growth is poised to slow as geopolitical disruptions threaten global industrial production. And at home, the pressure is even more acute. Broad fiscal spending in the second quarter actually shrank 8.4% from the previous year, a stark reversal from the 2.7% growth seen in the first quarter. This tightening is already dragging down investment and consumption.