Featured in Bloomberg: Xi Overcapacity Fight Leaves Economy Vulnerable Without Stimulus

Officials might also act with less restraint in stimulating consumer spending. There are more ways for the government to transfer income to the household sector without discouraging work, a key concern for the Communist Party, according to Adam Wolfe, an emerging markets economist at Absolute Strategy Research.

The government could achieve that by raising rural pensions, reducing employees’ health insurance contributions, or implementing a negative income tax for those earning below a certain threshold. Subsidies for families with young children could also become more generous, he said.

“So far, the macro response remains well short of the monetary and fiscal stimulus that pulled China out of its last deflationary slump in 2016,” Wolfe said.

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