China's Faltering Growth Revives Cash Vouchers Talk

Economic Slowdown Sparks Concerns

The economy of China took a turn for the worse as the country stirred fresh discussions over fiscal measures to revive growth. Recent economic data shows a worrying trend, pushing Beijing to consider further stimulus to meet this year's growth target of around 5%.

July Data Highlights Economic Struggles

July's figures have intensified the fears over the second-largest economy in the world following a discouraging second quarter. New home prices plunged at their fastest rate in nine years, industrial output slowed, and export and investment growth showed signs of weakening. Unemployment also rose, further burdening the economic woes.

Mixed Data Paints a Complex Picture

Although some of the data beats forecasts, positives are not as upbeat as they appear. Inflation, accelerated by a string of adverse weather instead of rising domestic demand, and imports, propelled by preemptive chip purchases in front of impending U.S. technology curbs, are very misleading. Retail sales, up, gained from low comparisons with 2023 that might not indicate a real rebound.

Policy Response and Future Speculations

The broader prospect is of concern to policymakers, who now face the prospect of choosing between accepting slower growth or implementing more aggressive stimulus measures. Additional urgency has come from the need to underpin consumer and business sentiment that risks spiraling lower without such support.

Carlos Casanova, an Asia senior economist at UBP, stressed that urgent radical policy action was needed. The government may be forced to run a budget deficit of up to 4% of GDP, from the 3% it had previously planned, he said, to provide enough stimulus .

Possible Adjustments in Fiscal Policy

Also, much speculation is done on possible changes to fiscal policy in the near future. According to one policy adviser who preferred anonymity, Beijing may decide to bring forward part of next year's bond issuance quota in case there are no signs of economic stabilization by October.

Looking Ahead

These will increase the debate for the inclusion of cash vouchers and other fiscal measures in spurring growth in China. The next few months will be very important in proving whether these will be enough to keep the economy on track.