Michael Pettis

Will China’s policy stimulus be enough?

Hui Shan, Michael Pettis, Alison Nathan

Following a disappointing 2023 GDP growth of 5.2% and weakening domestic demand in 2024, Chinese policymakers approved a 10 trillion RMB local government debt swap in November to address fiscal shortfalls while shifting strategy away from infrastructure investment toward consumption-led growth. Experts like Michael Pettis argue that this debt restructuring primarily transfers liabilities to the banking system without solving fundamental imbalances, and that true recovery requires difficult structural adjustments to increase the household sector's share of GDP. Amidst geopolitical risks from potential U.S. tariffs and uncertainty regarding future stimulus, the central government continues to centralize power and manage local asset liquidation to stabilize the economy.