Ex-Goldman chief economist says China’s economic response to the coronavirus crisis has been ‘timid’

CNBC reports that compared to many countries, China has rolled out little additional support for its economy that’s been hit by the coronavirus pandemic, said former Goldman Sachs chief economist, Jim O’Neill.

“It is striking when you look at China’s contrast to so many other countries in the rest of the world so far, how little fiscal expansion China has introduced,” O’Neill, now the chair of U.K. think tank Chatham House, told CNBC.  

“I think they’re being both prudent and very cautious and certainly, given the scale of the supply and the demand shock, China’s policy has been quite timid so far,” he added.

According to the International Monetary Fund, China has announced around 2.6 trillion yuan ($365.97 billion) worth of fiscal measures to counter the impact of the coronavirus, as of May 14 this year.

The amount includes unemployment insurance payouts and some tax relief and accounts for about 2.5% of its gross domestic product, according to the fund.

That’s far lower than many other major economies.

O’Neill explained that China is more cautious in stimulating the economy this time because the country does not want debt rising to unsustainable levels. Debt levels in China rose rapidly in the years after the global financial crisis, as Chinese authorities expanded debt to kickstart economic activity.

But China will have to do more, especially now that consumers have become a much more important growth driver, he said. He added that measures that help to support income, such as tax cuts, may eventually be “inevitable.”