China is proceeding cautiously with its economic stimulus plans amidst the ongoing trade conflict with the United States. Although this year’s initiatives have advanced, officials have refrained from implementing new measures, opting instead to rely on the hope that Washington will ultimately reassess its position. The Politburo recently pledged support for businesses and workers impacted by U.S. tariffs, yet it did not extend its commitment with additional deficit spending, a decision that disappointed investors and led to a decline in Chinese real estate stocks. Despite this, China is already working under a heightened stimulus framework to alleviate the potential economic impact of losing its major trading partner.
Analysts suggest that the current approach does not indicate a retreat from the expected growth rate of around 5% for the year, but rather a deliberate strategy to remain adaptable as the trade situation evolves. Macquarie’s chief China economist noted it is premature for Beijing to make any drastic commitments, as the U.S. could easily retract its tariff threats without similar repercussions for China. China has recently accelerated its stimulus efforts, having increased government spending while facing declining revenues. Recorded in the first quarter of this year, the fiscal deficit reached 1.26 trillion yuan, marking a historical high for that period.
Local governments have also significantly increased the issuance of special bonds to support economic operations. The People’s Bank of China has been active in lending to stabilize the market, showing that the appetite for monetary easing remains strong. While the Trump administration indicated a softer stance towards trade negotiations, Beijing has maintained its position, seeking the removal of tariffs. Analysts highlight the internal pressures on Chinese officials to safeguard economic growth and suggest that more substantial stimulus may be required to avoid a significant downturn.
However, China’s current strategy focuses on showcasing resilience and readiness for continued challenges, despite the potential risks involved in the unfolding trade dynamics.