HONG KONG – As the first major economy to hit Covid-19, China is now taking the global lead in withdrawing its economic stimulus efforts through pandemics.
Unlike the US and Europe, which are still flooding their economies with liquidity and spending, China has begun to gain credit in some quarters.
The move puts China at the forefront of meeting a challenge facing other economies in the coming years as their economies recover: how to withdraw stimulus without suppressing growth or causing broader market instability.
The policymakers in China have expressed concern about an overheating housing market and want to prevent greater imbalances. They are also keen to resume a multi-year campaign to curb debt that began to build during the previous global recession.
If handled incorrectly, China’s tightening could hurt its recovery, causing the world economy to shrink. China’s plans could also create wider problems if it causes more defaults or a larger correction in China’s stock markets, at a time when world investors are already uneasy.