China’s economic performance has fallen short of expectations, with recent data on growth and inflation signaling deeper-than-expected weakness. Despite a promising beginning to the year, momentum has faltered, raising concerns about the sustainability of the recovery. While fiscal initiatives have already been deployed, policymakers have shown reluctance to pursue aggressive intervention. Although experts anticipate some easing of monetary policy in the coming months, projected interest rate reductions are expected to be limited in scope. The current strategy reflects a cautious stance, which may have been reasonable when economic activity remained stable and external risks—particularly U.S. trade policy—were still uncertain. However, with domestic conditions weakening, the approach of managing through challenges without bold action may no longer be sufficient.
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China’s Economy Needs Help, But Will It Come?
If ever there were conditions that cried out for stimulus, China appears to have met them. Recent gauges of growth and inflation were more than just disappointing. n nAfter an encouraging start to the year, the expansion is in trouble. But authorities have given little sign they are prepared to jettison the caution that has characterized their actions. Fiscal policy has already done some work and, while economists predict interest-rate cuts later this year, the reductions are likely to be modest. The wait-and-see approach could be justified while activity was holding up reasonably well and the US was figuring out just how punitive tariffs would be. Beijing seems intent to just muddle through.