Policy Initiatives Are Expected To Maintain Growth
The leaders of the Communist Party of China emphasized that “stability” is the top priority of next year’s economic work. International Monetary Fund experts and former financial officials said that with the coronavirus infection and rising global inflationary pressures. China can adopt policy to maintain economic stability and prevent financial risks.
They said that the country’s economic performance is better than the rest of the world. It has more policy space to deal with the impact of the COVID-19 pandemic, including stronger fiscal and monetary measures.
IMF senior representative to China Steven Barnett (Steven Barnett) said at a virtual seminar on Wednesday that these policies will help the Chinese economy to recover better than other countries.
In the World Economic Outlook report released in October. IMF experts stated that due to the faster-than-expected monetary tightening of the Federal Reserve and the underestimation of inflationary pressures, new challenges may arise.
IMF economists said at the seminar that inflationary pressures are mainly driven by stronger demand. Pressure on commodity prices and supply chain disruptions.
Christopher Koch, an economist at the International Monetary Fund’s research department. Said that central banks can usually weather temporary inflationary pressures and avoid austerity until the underlying price dynamics become clearer. However, if the recovery is faster than expected or “the risk of rising inflation expectations becomes real” they should be prepared to act quickly, he said.
The Political Bureau of the CPC Central Committee and the Political Bureau of the CPC Central Committee held a meeting on Monday. Emphasizing that “stability” is the top priority for next year’s economic work.
The People’s Bank of China announced on Monday. It will lower the deposit reserve ratio of almost all financial institutions by 50 basis points from December 15 to inject 1.2 trillion yuan (189 billion US dollars) of liquidity into the financial market.
It is expected that more policies will be introduced after the Central Economic Work Conference. Economists expect further easing measures to prevent a hard landing of the economy.
“We may lower the deposit reserve ratio again by 50 basis points in the first half of 2022, but due to rising production price inflation and consumer price inflation. The possibility of interest rate cuts is still very small,” Lu Ting said. Chief Economist of Nomura Securities China.
Wei Benhua, former deputy director of the State Administration of Foreign Exchange and former China Executive Director of the International Monetary Fund. Stated that China has adopted a monetary policy that suits its national conditions. A prudent monetary policy will better support the real economy without the need to adopt radical easing policies.
Wei said that the central bank has also established a risk early warning mechanism after learning the lessons of the global financial crisis. The China has noticed the risk that the quantitative easing measures adopted by the central banks of some developed countries.
Guan Tao, chief global economist of BOCI and a former official of the State Administration of Foreign Exchange,
said that the destruction of the global supply chain caused by the pandemic could mean continued inflationary pressures.
The central bank may have underestimated the risk of inflation. Guan said, adding that since the 2008 global financial crisis, the impact of aggressive monetary easing has been accumulating. He added that if the financial market cannot absorb inflation, price increases in the real economy may cause major problems.
IMF economist Koch said that in order to avoid “shrinking panic” scenarios. Which usually lead to spillover effects such as capital flow transfers and exchange rate fluctuations. Monetary authorities need to focus on forward-looking guidance and communication. Koch said the authorities must also consider the normalization of policies by central banks in advanced economies.
International Monetary Fund President Kristalina Georgieva said at the end of the sixth “1+6” roundtable on Monday that China “has achieved a truly significant recovery. But its growth momentum has slowed down significantly. “.
“Since China is an important engine of global growth taking strong actions to support high-quality growth will not only help China. But also the world,” she said.