Sources with close knowledge of China’s economic policy planning told Reuters that a boost to infrastructure investment could be a crucial option to balance any hit to growth that comes with a trade war with the US.
“In the short term, the most effective way is to boost infrastructure investment,” said one government adviser. A second source mentioned parking lots and retirement homes in urban areas as areas where this money could most benefit, as opposed to grand mega projects led by Beijing.
Fiscal policy will also be central to absorbing the trade war’s impact, the sources agreed. Last week China’s State Council unveiled plans for a more active fiscal stance including tax cuts for small businesses and agricultural enterprises. A major stimulus package, such as that used in 2008 to counter the global credit crisis, was ruled out.
“Fiscal spending could be quickened and investment in some projects under construction will be expedited. This will provide support for the economy,” said one policy insider.