In my April 2025 Project Syndicate Column I discuss stunning results from recent research that suggest China’s big stimulus in 2008-2010 may have worked short-term but planted the seeds for today’s problems
“Progressive economists tend to view the massive stimulus package China deployed in response to the 2008-09 global financial crisis – which amounted to 12.5% of GDP – as a bold Keynesian masterstroke that every government should seek to emulate. The World Bank and the International Monetary Fund also sang China’s praises, as did developing economies that benefited from the resulting commodity boom.
But as economists took a closer look, a more complex picture began to emerge. While the mega-stimulus was undeniably effective in the short term, it also distorted the quality of China’s growth and sowed the seeds for many of the country’s current problems. This has prompted a broader reassessment of the government’s role in managing the economy. It turns out that when the state exercises too much control, it often does more harm than good. …..” Kenneth Rogoff, Project Syndicate April 2025