China needs deeper reform rather than more economic stimulus, central bank adviser says
- Deputy head of Development Research Foundation Liu Shijin says changes are needed to ensure China can avoid the middle-income trap
- China’s gross domestic product grew 6.4 per cent in the first quarter of 2019, beating expectations as hopes of a trade deal with the United States increase
China should expend greater effort on structural adjustments and the elimination of institutional obstacles rather than enact more economic stimulus measures to ensure a moderate economic growth rate over the next decade, a senior government researcher and central bank adviser said on Sunday.
The domestic debate has increased over whether the government should further loosen fiscal and monetary policy after China’s growth rate in the first quarter was stronger than expected, possibly indicating that the growth rate has bottomed out as a trade deal with the United States draws closer.
“Understanding what is China’s reasonable growth rate is the precondition for stabilisation [of growth]. We must abide by, rather than resist, the trend,” said Liu Shijin, deputy head of the China Development Research Foundation and a member of the People’s Bank of China’s monetary policy advisory committee.
“Economic activity is likely to [start to] expand in the middle of this year. But there won’t be a V or U-shaped rebound, nor return to a high-growth track.
Understanding what is China’s reasonable growth rate is the precondition for stabilisation [of growth]. We must abide by, rather than resist, the trend. No matter how loose monetary policy is, it can’t change the underlying growth potential.
“No matter how loose monetary policy is, it can’t change the underlying growth potential.”
A V-shaped recovery involves a sharp decline followed by a sharp rise back to its previous peak, while a U-shaped recovery occurs when the economy experiences a gradual decline followed by a gradual rise back to its previous peak.