PBOC adviser Huang Yiping has made a break from the usual restrained tone at the upper echelons of Chinese authority, with a call for bolder stimulus and a lower inflation target
Urges more fiscal stimulus and consumption boostWarns of “low inflation trap” risk for Chinese economySuggests lowering CPI target to 2%-3% from current 3%Rare public critique of Beijing’s conservative economic policies
The info comes via Bloomberg (gtaed).
Huang argues
for a significant shift in China’s economic policy approachthe government needs to step up fiscal stimulus and focus more on boosting consumption to avoid a “low inflation trap”.
Key points:
Current policies too focused on investment, neglecting consumptionSuggests direct cash transfers to citizens to spur spendingCalls for easing restrictions on migrant workers settling in citiesRecommends lowering inflation target to 2%-3% from 3%
The comments come as China’s economy struggles to maintain momentum, with recent data showing growth slowing to its worst pace in five quarters. Consumer prices have been flirting with deflation, highlighting the challenges facing policymakers.
Huang’s public critique is noteworthy given the increasingly sensitive nature of economic discussions in China. The yuan and Chinese equities will be ones to watch as markets digest these comments and gauge the likelihood of a policy shift from Beijing.
This article was written by Eamonn Sheridan at www.forexlive.com.
