China will widen its deficit and will issue special bonds to support its economy, which has been severely weakened by the Covid-19 pandemic, according to state media, which seems to rule out a massive recovery plan. The epidemic, which had serious repercussions on the production and the operation of the companies, practically put a stop to the country in February at the time when hundreds of millions of Chinese tetanized by the virus were terrified at their place.
Since then, activity has resumed thanks to the gradual lifting of anti-epidemic measures, but the consequences for the economy should drag on. At a meeting on the issue, key Chinese officials agreed to deepen the deficit and issue special bonds to support the economy, the official China news agency reported late Friday.
No quantified details were however communicated. China's deficit reached 2.8% of GDP in 2019, according to Beijing. With a struggling economy, Chinese purchasing power at half mast and a pandemic that is now paralyzing the main trading partners of the Asian giant, China could drop its deficit to 3.5% this year, says economist Ting Read from Nomura investment bank.
Mr. Ting, however, ruled out a massive stimulus plan like during the financial crisis of 2008-9 when Beijing sought to consolidate its finances. On Friday, the Chinese Central Bank said in a statement that the consequences of the pandemic on the economy were "generally controllable". "The economy is showing strong resilience, its fundamentals for healthy growth over the long term remain unchanged," noted the organization.
Analysts are more nuanced. The rating agency Fitch forecasts growth of 3.7% in China this year (compared to 6.1% in 2019, the slowest pace in almost 30 years).
