China’s Fiscal Challenges
China’s government is right to respond to below-target growth with expansionary fiscal policy, especially infrastructure investment. But to maximize the impact, policymakers must also address a flawed financing structure and loosen regulations on local-government special-purpose bonds.
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BEIJING – When China’s GDP growth is below target, successive governments have relied on the same tool: government spending on infrastructure investment to stimulate the economy. But the success of fiscal stimulus requires getting the details of implementation right.