Why has China’s stimulus been so stingy?

GOLDEN EAGLE WORLD is a glistening monument to commerce, a nine-storey mall with endless stores and restaurants, virtual-reality arcades and spas, even a zoo. But it is now trying something more basic, setting up food stalls outside to drum up business. Although China is back to work, customers have been slow to return. The giant mall in the eastern city of Nanjing has used giveaways and promotions, all to limited effect. “We’ve got to be prepared for a protracted war,” says one of its executives.

Most in China would recognise the term “protracted war”. It is a reference to Mao’s strategy for fighting Japan’s invading army in the 1930s: be patient and, little by little, wear the enemy down. It also happens to be a good description for the government’s approach to bringing the economy back from the coronavirus shutdown. It is shaping up to be a long, grinding battle, not a rapid victory.

Growth in the first quarter compared with the prior year, reported after The Economist went to press, was expected to be negative—China’s first official contraction in more than four decades. In the past this would have guaranteed a big stimulus. Yet this time its response has been more restrained. Other countries have announced huge spending packages. Why has China been so stingy?

There are two critical...

via The Economist: Finance and economics Business Feeds

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