Part 3/8:
A critical question was whether the government could effectively combat the debt-deflation spiral with greater stimulus. Initial disappointments over Beijing’s lackluster stimulus measures persisted throughout the year. Although recent announcements from the government indicated a commitment to implementing more proactive fiscal policies and loosening monetary conditions, market reactions remained markedly unimpressed. The government’s focus has shifted toward bolstering manufacturing and emerging industries, such as semiconductors and electric vehicles. However, the effectiveness of such initiatives seems to be diminished due to a fundamental lack of fiscal space at local government levels.