China | Is China’s expansionary fiscal policy sustainable?

We analyze the proactive fiscal policy of China in 2022, investigated government debt sustainability amid growth slowdown and make policy suggestions of financing fiscal deficits.

Key points

• Key points:
• Expansionary fiscal policy is to be deployed and play a leading role in support of growth in 2022.
• However, a sliding fiscal revenue amid growth deceleration adds to the concerns of government debt sustainability.
• We analyze and conclude China’s central and local government debt level is still manageable.
• Issuing central government treasury bond is the key to finance fiscal deficit.
• The thrust of proactive fiscal spending: new infrastructure and old infrastructure investment should be synergized.

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