PBOC Adviser Urges $209 Billion Stimulus to Counter US Tariffs

Economic Stimulus Proposal - China should implement a stimulus package of up to 1.5 trillion yuan ($209 billion) to enhance consumer spending and maintain currency flexibility in response to the impact of US tariffs on economic growth [1][2][4] - The proposal includes further cuts to policy rates and guidance for banks to lower Loan Prime Rates to strengthen expectations of nominal growth [1][6] Economic Challenges - The Chinese economy has faced "new disruptions" since April due to increased US tariffs, alongside ongoing deflationary pressures [2][5] - Economists anticipate that Beijing will ease policies further to protect the economy from potential export declines caused by US tariffs and increased scrutiny on Chinese shipments [5] Structural Reforms - The government is advised to expand the personal income tax base and simplify value-added tax structures to ensure fiscal sustainability [7] - There is a call to manage risks associated with loans to small- and medium-sized enterprises (SMEs) to enable banks to extend credit to more productive sectors [7][8] Loan Dynamics - Outstanding loans to SMEs have exceeded 60% of China's GDP, rising from 37% in 2019, indicating a significant increase in financial exposure to this sector [8]