Key question asked over financial firepower

Pettis, who is set to launch the book Trade Wars Are Class Wars: How Rising Inequality Distorts The Global Economy and Threatens International Peace, also warns that any fiscal expansion, particularly for infrastructure investment, may actually weaken the economy.

"China has overinvested in infrastructure for so many years that it is not clear that it can spend money in ways that increase productivity. In which case, unlike other countries that have underinvested in infrastructure, any increase in its debt will not be matched by an increase in its debt-servicing capacity," he said.

Substantial debt

Whatever firepower China has to respond to the crisis, many experts believe it will be reluctant to come up with measures seen on the scale of those in 2008.
While the stimulus, which was unprecedented at the time, stabilized the economy after demand for the country's manufacturing exports fell by 30 percent in a matter of months, it led to substantial local government debt, which became evident less than three years later in 2011.

George Magnus, a research associate at Oxford University's China Centre and at the School of Oriental and African Studies in London, believes that is why Beijing has been cautious, focusing on delivering bridging finance to businesses that have been disrupted by lockdown measures.

"There's no question China could do more. The question instead is why not, so far, and what would be consequences of reverting to yet another round of quasi-fiscal lending, as in 2008 and 2009," he said.

With escalating death tolls from the virus and massive economic disruption in the West, governments there have been forced into action.