Why China isn’t doing more to boost domestic demand

ONE of the most frequently asked questions about China’s economy is deceptively simple: Why isn’t Beijing doing more to stimulate domestic demand?

The case for a large-scale stimulus appears compelling. China’s property market remains in a prolonged downturn. Consumer confidence is weak. Local governments are burdened with debt. Deflationary pressures persist, while demographic ageing and subdued private investment continue to weigh on growth.

Many economists – both inside and outside China – argue that Beijing should implement a much larger fiscal stimulus, strengthen the social safety net, raise household incomes, stabilise the housing market, and rebalance the economy towards domestic consumption.