What’s in China’s policy arsenal to counter global recession?

Summary

This report analyzes the possible monetary and fiscal policy tools in front of the global economic recession led by COVID-19. We believe that fiscal policy should play a leading role. Regarding monetary easing, the interest rate cut progress should be more conservative while liquidity management should be enhanced.

Key points

• Key points:
• This report analyzes the possible monetary and fiscal policy tools in front of the global economic recession led by COVID-19.
• Regarding the monetary policy, the room for interest cuts seems limited. We believe the interest rate cut progress should be more conservative while liquidity management should be enhanced.
• For the fiscal policy, it should play a leading role in this round of stimulus. Main tools include: tax cuts and fee reductions , expanding local government bond issuance, increasing issuance of special government bonds, supporting the new infrastructure investment, etc.

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