China: return to budgetary rigor to pay the Covid bill

China is the only G20 country to have finished 2020 with growth of 2.3%.

REUTERS - Kim Kyung Hoon

Text by: RFI Follow

2 min

China, where the virus started at the end of 2019, was the first country to be hit by the epidemic.

It experienced a quarter of severe recession, but since then the country has managed to bring Covid-19 under control with drastic measures.

Result: China is the only G20 country to have finished 2020 with growth: 2.3%.

Yes, but the state stimulus measures have also made a significant contribution and today the question arises of who will foot the bill?

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With our correspondent in Shanghai,

Simon Leplâtre

China gave some answers on Friday: the Prime Minister announced the objective of growth of more than 6% this year.

It might sound like a lot, but in fact after a very bad year China could easily do better.

Six percent is therefore a modest objective which signals the return to a certain budgetary rigor.

The aim is in particular to control the indebtedness of state-owned enterprises: they are indebted to the tune of 142% of GDP, which is 12% more than a year ago.

Because when the economy is bad, the government asks them to invest to compensate for the bad economy.

But this strategy has its limits and in recent months more and more of them

have failed.

In short, the price to pay for this Chinese-style stimulus is more debt, and therefore no doubt a more pronounced slowdown in the economy in the coming years.

See also: China displays cautious optimism at the opening of its annual National People's Congress

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