China’s economy enters critical phase for year-end stimulus

China’s economy is pulling off a strange magic trick. Exports are surging, trade surpluses are ballooning, and GDP growth targets remain technically within reach. Yet consumer spending remains sluggish, and Beijing is now entering the most consequential stretch of the year for deciding how aggressively to intervene. The government announced a 360 billion yuan (roughly $54B) capital injection into eight state-owned banks and insurers on September 6-7, aimed at shoring up the financial system’s ability to lend. The export mirage August trade data showed exports climbing 25% year-on-year to $401.44B, while imports rose 28.2%. The monthly trade surplus hit $119.1B, and the cumulative surplus from January through August reached $805.5B. Q2 GDP came in at 4.3%, a number that sits uncomfortably below the government’s roughly 5% growth target for the year. Most forecasters have clustered their full-year projections between 4.5% and 4.8%. Stimulus, but make it surgical The consumer-facing efforts include RMB 250B allocated to trade-in programs for consumer goods, essentially subsidies that encourage people to swap old appliances, vehicles, and electronics for new ones. Expanded interest sub...