Description: Andrew Batson's blog. Musings on China, books, economics, jazz, history, and other stuff of interest.
As China’s data continue to disappoint, there is a persistent theme in much of the outside commentary on its economic woes: that China is for some reason failing to take the “obvious” step of sending stimulus checks to households. The implicit argument is that the US handed out massive subsidies directly to households, got a great post-pandemic recovery and everything turned out fine. China did not deliver subsidies to households, and that’s why everything is very much not fine.
Why is China, still, not taking this course in spite of the positive example of the US? Of course, an obvious answer is that the people in charge don’t think the US example was that positive, and anyway aren’t particularly prone to think of the US as a model to emulate. The merits of the pandemic fiscal-policy response are still pretty contested in the US. Plenty of people think of the stimulus as a fiscally irresponsible gamble that ultimately had pretty disruptive macroeconomic effects, because of the hug
My suspicion is that part of Chinese policymakers’ reluctance to use direct transfers to households as a short-term stimulus stems from a fear of setting a fiscally destabilizing precedent. If debt-financed transfers failed to generate a sustainable recovery, the money would be wasted. But if transfers succeeded in generating a good burst of growth, that could have even bigger longer-term effects. It would mean that, the next time China falls short of potential growth and full employment, the political pres
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