Supply-side solutions for demand-side problems

CHINA FINANCIAL - Report 20 Sep 2019 by Michael Pettis

Special points to highlight in this issue:​

* Although China’s GDP growth has continued to slow quite dramatically, Beijing doesn’t yet seem to have been panicked into planning a heavy stimulus. Although I do think we can expect a mild stimulus in the next month or two, I continue to believe that growth in the second half of 2019 will come in at the very low end of the 6.0-6.5 percent GDP growth target.

* This should set the stage for a much lower GDP growth target next year, perhaps as low as 5.5 percent.

* Beijing is eager to boost domestic consumption so that it can continue to allow investment to decline as a source of growth, but measures aimed at boosting consumption by making it easier to shop betray a deep misunderstanding of the real constraint, which is growth in household income.

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