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- China's policy stimulus may worsen economic distortions - OECD
China's policy stimulus may worsen economic distortions - OECD
China's stimulus measures will shore up economic growth this year and next but may undermine the country's drive to control debt and worsen structural distortions over the medium term, the OECD said.
Beijing has stepped up fiscal stimulus to prevent a sharper slowdown in the world's second-largest economy. Local governments will be allowed to issue 2.15 trillion yuan worth of special purpose bonds in 2019 to fund infrastructure projects, a jump of 59% from last year.
"Infrastructure stimulus could lift growth over the projection horizon, but it could lead to a further build-up of imbalances and capital misallocation, and thereby weaker growth in the medium term. The stimulus risks increasing once again corporate sector indebtedness and, more generally, reversing progress in deleveraging," the OECD said in its latest survey on China's economy.
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