Welcome to the Sound of Economics, the podcast series by Brugge, the Brussels-based economic think tank.I am Yu-Yun Zhang, host of our monthly podcast Zhonghua Mundus, that brings you recent updates about Chinese economy.
Today, we are going to discuss China's recent stimulus announcements.As usual, I am with our senior fellow Alicia Garcia-Herrero.She's joining us from Taipei today.Hi, Alicia, how are you doing? All fine.Hello, Yuyin.Thank you, Alicia.
Always nice to see you.And we're also glad to have with us today Alfred Shipke, who is joining us from Singapore.
He is a professor of the practice of international finance at the Lee Kuan Yew School of Public Policy and the director of the East Asian Institute at the National University of Singapore.Alfred, welcome to the Sound of Economics.
Yuyin, very, very happy to be here.
Thank you for joining today.On 24th September, just before China's National Day holiday, Chinese government announced a stimulus package to boost the economy.
Throughout October, we have witnessed more policies coming out following this trend, and we have also witnessed the volatile reactions of investors directly from the Chinese stock market.
Alfred, what prompted the Chinese government to introduce this new round of economic stimulus?And what are the key components of this package?
You know, economic data over the last couple of months that we have observed was very, very weak, supported then by anecdotal evidence that some local governments had difficulties in actually making current payments, even running wage arrears.
The economy was confronted with extremely weak demand, a lack of confidence, and that was then mirrored in what we call deflationary pressures that were starting to worry people that it's not only the impact currently,
but that we couldn't move toward a downward spiral that would follow a pattern more similar to that we had seen before in Japan.
So it was really the state of the economy, the lack of confidence that at one particular point then prompted the authorities, what I would say it's almost a paradigm change,
to then actively start initially with monetary policy action, more recently with Fisker, and again, another round of monetary policy action today.And that was already reflected in the data.Now, the support had many different parts to that.
One of it is, of course, to instill confidence.And here, I think the authorities were very vocal to, for the first time, I'd say,
say that they are willing to use counter-cyclical policies, especially fiscal policies, to arrest the lack of confidence in the economy, that the package that would ultimately be announced, and the numbers have not been made public yet, will be the largest in recent history.
And then furthermore, which is quite unusual, I think, for China, where at least the central government has been extremely conservative, I think most Europeans, I would sympathize with that.
So like sticking to a 3% deficit to GDP ratio, never wanting to go beyond that in principle being pro cyclical to say, you know, we have a large balance sheet. The central government has a large balance sheet and we're going to mobilize it.
So instilling confidence, including by providing forward guidance, you know, it was not quite as aggressive as Draghi, whatever it takes, but some of that language actually comes through.
So I think truly the understanding that something major has to happen in order to arrest the downward spiral that I was talking about.
So apart from the confidence measure, there's a little bit of de-risking, basically allowing local governments to pay back their implicit debt because there was the risk that that could spill over into the banking sector.
You know, what was maybe not so clear, and we can discuss that maybe later on in detail, is the direct support to households.One other element that was included in that is the recapitalization of large state-owned banks.
That, of course, increases the resilience of the financial sector, but it's probably more of a medium term measure in the sense that currently loan demand is relatively weak.
It is that when the recovery starts to take place, that the banking sector is then able to provide the financing.
Thank you for that introduction, Alfred.Alicia, as Alfred just mentioned, this might be one of the biggest stimulus that China has announced in the recent decades.
And how significant is this stimulus compared to previous packages, like if we think about like maybe before COVID or like to the previous financial crisis?
I think this is a very different stimulus package because it was not like, you know, the Prime Minister Wen Jiabao saying, look, we're going to do 4 trillion, boom.All of a sudden, everything following.
This started with the BBC Governor, then Politburo, then three press conferences already.You know, it's like a slow motion type of announcement.And I think that the reason is that they're still scrambling to find a way.
Public debt is much higher, so I don't blame them.It's not easy to find how to do this in a way that is not too costly in terms of the financials, so adding up to that debt.
But on top of that, because I actually would not even call it so far a stimulus, at least not on the fiscal side, I would call it a rescue package.Maybe it's a little bit exaggerated, but it's in between.
Because a lot of what Alfred really said, and I fully agree, is covering holes, let's put it this way, I mean, making sure that financial stability is not at risk, making sure that banks are recapitalized.Why?
Because they've lost some solvency, whether it's the real estate, the local governments, both together.Local governments need to pay their hidden debts.This is another part of the package. We don't know how much yet.
On the real estate side, we have two much more clear measures.So that's where I think they'd be more specific on the numbers.So a million units that will be basically refloated, mostly from tier one cities, by the way.
And then 4 trillion RMB, which is around close to 600 billion US dollar in what they call white night, which means giving money to the local governments or the banks to clean up the debt of developers or maybe purchasing unsold units, you name it.
Bear in mind that that number may look huge, but at least 2.2 trillion out of four have already happened, or at least on paper.And we didn't see the impact on the real estate market.I think we will, to be frank.
I think we're starting to see a little bit of a rebound. But I would not consider, no matter the number, yeah?I mean, for Europe, 500 billion US dollars is a lot, or 600 billion.But I don't think it's the same as a stimulus.Why?
Because you are basically covering losses.I mean, the multiplier of covering a loss compared to giving money to a household to spend is not the same.So is that right?And I finish here.Yes, it is, because You cannot throw money on bad money.
I mean, you need to clean up first.I don't disagree with what China is doing, but I'm trying to explain that this is not like Christmas is coming, like with Japan.This is a different thing.I have a lot of debt to clean up.Give me time.
I need to do this.All of this debt is deflationary because this is a lot of excess Capacity of housing, you name it.So China is cleaning up good for them.I think they need it.
And maybe later they can do more on consumption, but this is the core of what we've heard is really clean up exercise, which is. highly needed.
So whether we call it a cleanup or a rescue or risking, so basically on the real estate market side, it's the central government is giving money to local governments in order to buy back some real estate, empty buildings, because the households are not buying it anymore and to kind of stabilize it.
Alfred, the property sector is a quite significant driver of China's economy.Do you agree with Alicia's assessment that this is highly needed?And will this be enough to stabilize this sector?
I certainly agree that it's needed.So I think we're on the same page here.I mean, just for people to kind of recognize the uniqueness of China, first of all, as you highlighted, 20 to 30% of GDP basically in the past came from the real estate sector.
But then more importantly, 60 to 70% of household wealth is in real estate.So when that sector starts adjusting, prices fall, that has a big impact on consumption.
And when you look at countries like the United States, the equity market that matters, when the equity market collapses, that has an impact on the confidence and spending.In China, the equity market doesn't matter.
What really matters is the real estate sector.So addressing the real estate sector is the Achilles heel of what China is currently facing.
I would also agree that the measures are important, but I think there is also consensus that given the large overhang that exists, that probably more needs to be done going forward.
The language that is in there basically suggests that local governments can buy completed and unsold home inventory for social housing. That probably precludes a large part of what is currently on the market.
So in my judgment, I think I would not be surprised to hear that more support will come forward.
Thank you.And real estate is important, not just because it's doing so much for the GDP, but it's also in the past generated revenue for the local government.And Alicia, you just mentioned that local government has a huge pile of debt.
How will this stimulus affect China's debt burden?And are these concerns about the long term sustainability of these measures?
Well, I think what China is trying to do is to first centralize the debt.So, you know, all of these issues that we're discussing here is central government issues.And China has been preparing the market to make this cheaply.Why?
Because long term sovereign yields are record low. as low as Japan, so it can't be any cheaper.So the idea is to move from expensive local government issues to cheaper central government issues to start.
Of course, the local governments might not necessarily like the idea of depending on the central government for everything they need to pay, if you see what I mean, but that's what's going to happen.
This has pros in terms of the cost of funding, it has a minus because it might reduce the competition and the dynamism of local governments trying to compete among each other and so on, maybe.
But to your question, the key here is this needs to be done.Because the minute we have a default of a local government financial vehicle, you name it, the cost of funding of local governments is going to explode.And China knows that.
So they're trying very much to solve the problem at the source before it actually explodes.
And that's why we're going to see these issuance at the central level to help the local governments, to give them the resources, whether it's regular transfers, whether it's ad hoc transfer, we'll see. to recognize that hidden debt.
What is this hidden debt?We're not even talking about past debt.There's some numbers there that out of the 30% of GDP that was recognized in 2018 or so.I mean, I'm talking of my head. by the national audit.
People say that 15 has been covered, that this is going to cover the other 15.This is a stock problem.I don't know about this.
But what I know, and this is totally agree with Alfred, is that you now have suppliers to the local governments, let alone even civil servants, that need to be paid.We're talking about the flow here.
And I think that the most immediate thing they're going to do, there's this number 2 trillion, we'll see.But it's really about this year's delays in payments, they need to do that immediately.
Because if not, you already see the number of loss making companies in China. record high.So, you know, it can be a snowball.I don't think that might be default, but at least, you know, like, technically so.And I think this has to be avoided.
So for me, it's more about paying the current debts than cleaning up the whole thing this year.I don't think that's going to happen, to be frank. But if they already can avoid snowball effect, it's already a lot.
So again, this is about avoiding a hard landing.This is what we're talking about here.We can call it a stimulus, but I think we should be slightly less ambitious, yeah?
I mean, we are increasing our growth rate, like we don't do at Bruegel, but you know, my different life, slightly to 4.5 next year rather than 4.2.That's what we're talking about here.We're not talking about growing 8%.
I mean, but we are happy with 4.5 because it's a cleanup exercise and that's good for China.So that's the way I would read this.
It's true that we have heard news about teachers and or like police, they're not getting paid because the local governments just do not have the revenue to give out salaries.Could you just explain why this is hidden debt?Like, why is it hidden?
Well, Alfred is the expert.He will tell you more.I just need to say that we don't know what's the fiscal deficit.I mean, consolidated is a big, big story.I leave it up to Alfred.
Alfred, maybe could you help us here?
Yeah.So, you know, local governments were or are legally constrained from borrowing.So they have a quota that they get every year, but then they are encouraged, forced to achieve growth, do investments.
And so they've become very creative in finding ways to finance themselves, especially what they call local government financing vehicles.And this is basically debt that is not really covered.And Alicia said we had an exercise in 2000,
2014, when the national audit went out and I think they had about 100,000 people that went to local governments.Again, at the time, local governments were not allowed to have any debt whatsoever.So they had a balanced budget amendment in the U.S.
context.And they came home and I think the number was 15 or 20 percent of GDP that was recognized.So local governments actually had found ways to borrow.We're in the same position again this time.
Local governments relied on these financing vehicles that are now becoming a problem because if local governments cannot pay, then that spills over to the banking sector or even capital markets if it was financed otherwise.
And just to highlight the challenge that local governments are facing, I don't think people generally understand that this, again, is a major, major shift. Local governments in the past have been the key source of economic activity.
Alicia was talking about, you know, the competition among local governments, the investments, 80% of investments were basically done by local governments.And how did they finance themselves?
Well, over the last 10 years, mostly by issuing debt, either officially or hidden debt, local government financing. And the other one, which in the West we would call privatization, it was called the sale of land, basically privatization receipts.
And just to give you a number, two or three years ago, the resources, you don't want to call them revenues, let's call it financing, that you got from the sale of land amounted to 8% of GDP, 8% of GDP.
This year, we're projecting that to be 2.4% of GDP. You know, this is, of course, because there is a big adjustment in the property sector.
But it also implies that going forward in the new equilibrium, where real estate will not play the role that it played before, probably one could make an assumption that local governments only get half of what they were making before.
So if we use these numbers, 8% of gross financing from the sale of land, and you only get 4% of GDP, that's a 4% of GDP gap that you have to finance otherwise.And that's in addition to the fact that you can't really borrow anymore.
So the challenges that local government face are current challenges, where they have difficulties in making debt payments, current payments.But the biggest challenge, I think, is going forward
How do you change the structure of China's economic model that in the past very much relied on local governments for economic growth?And that going forward will not be feasible because the resources will not be available.
Thank you so much, Alfred.I think you put that really nicely.And this naturally brings out my next question, since we're talking about structural change and then like the change of the pattern.
I want to discuss a bit more about how local households are being affected by this.Are there any measures that are directly affecting households despite the social housing part that you just mentioned?
No, this is sort of like what we call the missing person or the missing action in the package.
I think there was and I think there continues to be quite the hope that maybe as part of next year's budget, there could be significant support to the household sector, probably linked
maybe by providing support to families that have two children and more, or to, you know, the poorer part of society.But so far, we haven't seen anything.And I think maybe this was the part that surprised many.
The expectation was that at least part of the package would be to support households directly and apart from the scholarships. and some very, very poor people, there was nothing in the package.
So the question is a little bit, is this going to be worth coming, given that people said there will be a lot and more will come?If not, I think then we have a problem.
Indeed, I think they announced that there will be a slight decrease of the mortgage rate.So that's directly affecting the household, but that effect will be very offsided by also the decrease in the deposit rate, right?
Can I maybe counter that argument?It is not about households borrowing.Households are feeling the debt burden. Remember the value of your collateral, the asset that you have, household, that has diminished because of the fall in prices.
Bank lending has been very weak.The outlook of the economy remains uncertain.So I think the ability to stimulate from the monetary policy side, it is of course an element But I don't think that's the part that I'm talking about.
What we're talking about is truly providing support to households, which is what we in the West call traditional fiscal counter cyclical policy that puts money into the pockets of households and therefore the expectation that people can spend.
So more borrowing, I don't know whether that's going to make that much of a difference.Of course, at the margin, it helps. So it's very much welcomed.
But in the Chinese context right now, I think it's fiscal rather than, in this particular case, reserve requirement reductions that allow banks to lend a little bit more.
Alicia, I think in the past episodes, we have discussed how the Chinese government has always been very reluctant in giving fiscal support, like giving money to actual households.
Because even during COVID, when consumption is really low, we have seen in Europe and then in the US, people are getting stimulus checks from the government.But in China, they never really did that, right?
Yes, why not?Why aren't Chinese households getting any support?Well, because, you know, it's not easy.Even in Hong Kong, you know, I got all of these checks on my WeChat. What if I don't want to buy a new refrigerator?
You know, I mean, this is not the way to stimulate consumption in the way I understand it.I mean, if you have no choice, if it's a COVID thing and you really need to put money, helicopter money, like for once, you may do it.
But you can do this continuously.I mean, we economists have come up with other options, yeah?Automatic stabilizers, you create some welfare state
it happens as we speak, whether it's, you know, unemployment benefits, you don't need to have somebody say, well, I'm going to give you an unemployment benefit, you know, you just get it, because he's automatic.
And I think, frankly speaking, China is just not comfortable with an automatic delivery of support to the household. That's the reality because it can be so hard.Let's face it.It's like well, you know, well known and it doesn't happen.
So when they desperately need it, they come up with these vouchers, whether, you know, reductions in price of EVs or or again, white goods.But people need other things, you know, it's like
So I just feel that unless they kind of come up with the idea that these automatic stabilizers make sense, you won't have a big consumption-driven stimulus, because you can't give vouchers to the whole population to make a change.
in structurally, it just can't work.But yeah, having lived in Hong Kong for a long time, I can tell you this, we got electricity vouchers, we got all kinds that people would even lose because you didn't know how to use them.
It's like so stone age, I'm sorry.I mean, like compared to what you can do to stimulate consumption that I just can't imagine that it's purposely the case.It's a way to not to tie your hands. Yeah, it's a way to say, okay, there you go.
I do it once, but don't ask me next time.And we know why, because, you know, if you look at China's budget expenditure, you can see, you know, there is economic affairs, subsidies, huge.There's no room, there's no room.
They would need to rethink their fiscal policy fully to be ready to jump on the automatic stabilizers and stop giving vouchers around. That's my take on this.Sorry.It's a big one for me.
I mean, I just feel it's unfortunately like we've been banging, I'm sure, the IMF, everybody.And it's like, how come?But I think the reason is there's no interest because it can be so difficult.
I think this is needed to be said because it's almost like the Chinese government is allergic to the term of like welfare state, like they don't really want to give direct incentives to people and then in order to boost consumption.
But do you think this will change?Like, do you think they will come up with more fiscal stimulus, Alfred, like what you said for the households with two children, or like Alicia, if you want to chip in too, like do not hesitate.
Do you think they will give more stimulus to the households?
Yeah, so I think I would agree with Alicia.There is something in the Chinese DNA that, you know, and that's the reason why
the focus has always been on the supply side and not so much on the demand side, that there is something inherently wrong by giving out free money, so to speak, on being a little facetious.
You know, this concept of welfare state that you mentioned, you know, that's something where Singapore is also very careful in not conveying the message that it's a welfare state, but it has used policies, including during COVID, to provide support.
I think having said that, we have seen that support is usually linked to something that they feel comfortable with.
So last year, for example, the support that was provided to stimulate the economy was actually, I think, related to a natural disaster kind of cleanup.And then it was actually used for investment, and then that was meant to support the economy.
So I think I'm a little bit more optimistic that if it is linked to some other broader public policy objective, demographics, support for families with children, the likelihood is greater.
I also think that, you know, some of the academics in China are now using a new term, social investment.
You know, what that kind of means in a Western concept is, you know, the public sector is providing services, health, unemployment, whatever it is, but you don't want to call it that way.Now, investment, people kind of can accept.
So they are kind of smartly using the concept of social investment, where people would say, why don't you just call it, you know, public support or somehow education policy?
But it might very well be true that that's a way to overcome that or to do it in line with the thinking that the government has.
Having said that, I think there will probably going to be something, I think it is very attractive for the government to provide support to households that have more kids.As you know,
One of the reason that people don't want to have children anymore is the cost of living has gone up dramatically.So anything that changes that perception at the margin might be helpful and that could be important.Maybe two other comments.
One is, you know, some of the households are actually financially constrained, right?So they would benefit from getting any support, ideally not a one-off, but you know, more continuous support.
And then you have to ask yourself, how do you finance that?On the issue of vouchers, it reminds me that Japan, for the longest time, had a similar phenomenon where they tried to cut taxes.I think 1997 it was.
And the household said, thank you very much.I'm going to take the money.I'm going to save it.So I'm not going to spend it.And then the Japanese government was like, OK, we're going to give you vouchers.
And the Japanese household was, thank you very much for the voucher.The money that I would have spent, I'm not going to spend.I'm going to use the voucher instead.So you could not get the Japanese household to spend more.
I don't think that's exactly the problem that China has.I think there are households that are constrained.You give them money, they are likely to spend at least part of it.So I wouldn't be surprised if more is going to come.It might not be
under the terminology that we have in the West as direct support to households, but linked to some broader other objectives, including demographics.
It's very interesting, Alfred, that you brought up Japan as an example, because last week we just published another podcast about how Europe can learn from Japan's deflationary and also demographic changes.
Since the world is going towards the trend of, you know, a demographic change with the aging population, it's important for us to see what lessons have worked for Japan and what did not.
And so then for China and for EU and then also for many other countries in the world to see how we're going to address this issue.
Alicia, coming back to China, what will you be watching in the next few months to evaluate the effectiveness of this stimulus package?
Well, I guess because of the nature of the package and I guess I hear that something will come on conception, but I don't think that's the most immediate thing we'll see. We'll see a lot of cleaning up, recapitalization plans, you name it.
Well, I first want to see how quickly this is done, because the Japanese experience in the 90s was that it was done very slowly.And that was, in a way, not getting Japan out of the deflationary situation.So I'm hoping China can do this faster.
And I'm also hoping that we will see a reduction in inflationary pressures on the upstream sectors, which are very affected by the excess supply of housing. Let's see if we can see, I don't know, prices moving up, and that is a good signal.
And I'm not going to care too much about the stock market doing well, because I know that there's a lot of money for that to happen.So far, 800 billion, probably more coming.So that's the signal that is very distorted.
It'd be nice for those who hold Chinese stocks, but the point is that's not where the action is, in my view.So it's on prices.And then I hope I can see that stimulus on the household side, and we can see consumption growing faster.
We had a little bit better data today for September, 3.5, I think, retail sales, which was good. compared to 2.1 in August.But of course, I mean, we need to see this, at least say if you want to grow 5%, maybe go all the way to 5%.
But that will come probably a little bit later.So for this year, I'm just already hoping that I don't see deflationary pressures as entrenched as they have been for the last two years, if not two and a half years in China.
So like you mentioned this, you call it more like a rescue package in order to not have the economy kind of hit the ground.And I think I want to bring it to more a bigger picture to discuss.
the need for a short-term stimulus package versus the need for a structural reform for Chinese economy, as you both have pointed out.I don't know who would like to start.Maybe I'll start with you, Alfred.
Yeah, that's the perennial question.There is no doubt that the structural adjustment is super, super important.As I indicated, China is in the middle of changing its growth model.It has to change its growth model.
It cannot rely on investment driven, local government financed in whatever shape or form in real estate growth model.It has to switch to a new growth model that will be very different if China is successful.
The problem is that each time, and we've had episodes before, this is not new. We have had episodes in 2014 where the government wanted to change the model.The problem is it comes with pain.
In the past, the reaction was to loosen the constraints, to basically leverage up and to postpone the restructuring to a later point in time.
And I think there is something inherent about the relationship between the center and local governments, where the center is reluctant to providing support because it can ultimately not really control local governments.
That sounds weird for a country with a very strong political leadership.But local governments have demonstrated many, many times they do whatever they do.And so if the central government provides support now,
can it be sure that the structural adjustment that needs to take place will take place?To give you a specific example of something I'd be concerned about, that China now is focusing on high quality growth, new productive forces.
The first reaction of local governments is to basically establish new companies. under the umbrella investments, that they will be the ones that ultimately deliver high quality growth.The first thing is investment again.
So when you provide support, you don't know how the money is ultimately used.And therefore, are you sure that once the support is gone, you have a changed structure of the economy?On the other hand,
And that's what we saw over the last year before the latest policy shift.If you don't support that adjustment process, then you have these deflationary pressures.
And then ultimately, either you're following the Japanese model, or you have to abandon that strategy.I think that's what they're in.
But in the absence of the structural reforms, the only thing that we're going to see is now the balance sheet of the government is going to leverage up. We've had two episodes before.We started over the corporate sector that leveraged up.
Then it was the private sector, largely mortgages.There is now a 60% of GDP.And the one, at least for the central government, you look at the whole still reasonable balance sheet of the government, and now you're providing additional support.
But of course, each time your leverage continues to rise.Now, if at the end of the process,
you have a fundamentally different structure of the economy that allocates resource efficiently, that is, you know, productive, then, of course, all of that is fine because you're going to have economic growth going forward.
But if not, then we're going to see this game over and over and over again.So the two go hand in hand.It is not easy to orchestrate that these two are going hand in hand, even a place like China.
Alicia, do you want to add in here?
I think Alfred has nailed it.We've been saying this for so long.I'm sure China does not want to use Abenomics as a framework, but basically that's what it is.
You can do what you want on fiscal and monetary, but if you don't reform, this is not going to help. And by the way, when ABEC came and designed Abenomics, the Japanese economy had already cleaned up.
So I would say cleaning up is a precondition to Chico-nomics, which does have monetary.I don't think that the financial conditions are tight in China because of deflation.I mean, the real interest rate is high.
We estimated the fiscal stance, it was also tight, which is like, you know, but that's not all.You can lose both and you will still not solve the ultimate problem of structural deceleration.For that you need to
take a few steps into key reforms and everybody knows that, but you know, that's a good start that we're on the preconditions with a little bit of stimulus.That's where we are, but we need, we need to hear more.
So my closing question is why should the world be caring about this stimulus packages?Like how the global economy will be affected by this?
Very quickly. Well, you know, people ask for investors ask because there's been outflows from chat for four months and they want to come back.And in fact, they have in the last few weeks since, you know, last week of September.
But, you know, now they're like still hesitating because they can't see the direction. If everything that is happening is a slowdown in the deceleration, it's not a big story for investors.And also yields are coming down.
So it might not be as appealing, even if this is good for China.But investors are looking for yield, and it's not clear that the yield will increase. But on the other hand, imagine what we are avoiding.
If we're avoiding the hard landing, we should all be cheering, you know, anybody who exports to China.So in that regard, I think it's good news for the world, because this is kind of a great rhino.
I mean, we saw China kind of slowing down, slowing down.And in a way, we should ask ourselves, sustainable.I mean, disposable income is barely stable.I mean, is this sustainable for a country that has grown so fast?
So the fact that they are reacting is very good for the world because we're avoiding a major risk to the global economy.I would put it that way.
Alfred, do you want to chip in here?
Yeah, maybe two or three comments.One thing is, of course, China has been exporting deflation. Maybe the rest of the world could say, thank you very much, China, you have actually helped us.
On the deflationary side, maybe inflation would have been even higher in other parts of the world.But related to that, it has also led to what some people call the overcapacity.Domestic demand is weak, and that creates further trade tension.
A stronger Chinese economy will ultimately lead to increased imports and therefore, and less exports, most likely.So in the current context of trade tensions, it should be useful.
And then the third part is, I mean, we know that, you know, the spillovers from China to economic activity in the region, especially in this part of the world, but also globally, are still quite significant.I think it is still about
30% of growth shock to China is transmitted to the Asia and Pacific region on average, and that's significant.So the flip side of that is if China does better, that of course is helpful to the rest of the world.
Since I don't focus so much on markets, because sometimes markets are about short-term opportunities rather than about the long-term behavior of the economy, obviously anything that China does
that would increase its growth potential in a sustainable manner, and I'm talking about the 5% truly sustainable, that is good for long-term investors, obviously, and ultimately good for the world.
Thank you very much both.I think it's a rare situation that we ended more on a positive note in our usual podcast conversations.But thank you for joining us for this episode.
I am Yuyun Zhan, and I am with Alicia Garcia Herrero from Bruegel, and also Alfred Shipkitt from the National University of Singapore.
For listeners, you can find all our research on China at broogle.org and sign up for Zhonghua Mundus, our monthly China podcast and newsletter, with link in the show notes.Until next time, bye-bye.
Sign in
