China ready to go deeper into debt to counter Trump's tariffs

BEIJING, Dec 10 (Reuters) - In one of their most dovish statements in more than a decade, Chinese leaders signalled on Monday they are ready to deploy whatever stimulus is needed to counter the impact of expected U.S. trade tariffs on next year's economic growth.

After a meeting of top Communist Party officials, the Politburo, officials said they would switch to an "appropriately loose" monetary policy stance, and "more proactive" fiscal levers.

The previous "prudent" stance that the central bank had held for the past 14 years coincided with overall debt - including that of governments, households and companies - jumping more than 5 times. Gross domestic product (GDP) expanded roughly three times over the same period.

The Politburo rarely details policy plans, but the shift in its message shows China is willing to go even deeper into debt, prioritising, at least in the near term, growth over financial risks.

"From prudent to moderately loose is a big change," said Shuang Ding, chief economist for Greater China and North Asia at Standard Chartered. "It leaves a lot of room for imagination."

Tang Yao, associate professor of applied economics at Peking University, says this policy reset is needed, because slower growth would make debt even more difficult to service.

"They've by-and-large made peace with the fact that the debt-to-GDP ratio is going to rise further," said Christopher Beddor, deputy China research director at Gavekal Dragonomics, adding that this was no longer "a binding constraint."

It's unclear how much monetary easing the central bank could deploy and how much more debt the finance ministry could issue next year. But a...
[Short citation of 8% of the original article]