Jim Cramer Doesn't Think China Can Deflate With Its 'Guns And Butter' Strategy: 'Lousy Combination'

Zinger Key Points
  • Chinese second-quarter GDP growth rose at a underwhelming pace of 6.3% in the second quarter.
  • The Communist regime, without going into the specifics, has promised stimulus measures to kickstart growth.

The Chinese economy has failed to gain any decent momentum following the reopening from stricter COVID-19 lockdowns in Dec. 2022. Macroeconomic indicators vouch for this fact.

Weak data has prompted the communist regime of the country to promise stimulus measures to kickstart growth.

CNBC Mad Money host Jim Cramer on Monday said, “China can keep trying to stimulate but can it have a guns and butter strategy and still deflate.”

“Guns-and-butter” is a phrase used to refer to a government's dilemma in apportioning spending between defense and social programs.

Apparently, the stock picker finds it hard to believe that the government spends lavishly on both defense and social programs and still has a deflationary environment.

Data released by the China National Bureau of Statistics showed that consumer prices remained unchanged in June relative to the year-ago period and producer prices fell 5.4%, marking the ninth consecutive month.

See Also: Best Chinese Stocks

"Military and luxury spend stimulation are a lousy combination," Cramer said. He also questioned whether "Belt & Road" will still be a priority after the more than $200 billion spent on stimuli.

China's Belt and Road Initiative, also known as the New Silk Road, is an ambitious infrastructure project launched in 2013 aimed at increasing China's economic and political clout. It was originally devised to link East Asia and Europe through physical infrastructure and the project has now brought within its ambit Africa, Oceania, and Latin America.

When China hinted that it will implement measures to revitalize the slumping property market earlier this month, Cramer said, “A stimulus policy based on home buying in a no-growth economy has been a sucker’s bet every time. Only the West buys into it. But we don’t live there.”

The iShares MSCI China ETF MCHI edged up 0.26% to $49.61 in premarket trading, according to Benzinga Pro data.

Read Next: ‘China Has 10 Years Left, At Most’ — 100 Million Population Drop Could Lead To Economic Disaster, According To Famed Analyst

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Posted In: AsiaNewsPoliticsGlobalTop StoriesEconomicsChinaEurasiaJim Cramer
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