China should learn global financial crisis to combat economic slowdown, central bank says
- People’s Bank of China pressured to cut interest rates to stabilise economic growth, but senior official says country should use ‘institutional advantages’ instead
- Comments come days ahead of the Central Economic Work Conference, at which top officials will set the economic policy priorities for 2020
The economic problems created by the aggressive monetary policy easing undertaken by Western central banks in response to the global financial crisis a decade ago are a clear warning to China not to go down the same path to combat its current economic slowdown, according to an official from the central bank.
China, instead, should use the institutional advantages unique to China to address the country’s economic problems, Zhang Xuechun, deputy director of the People’s Bank of China’s (PBOC) research bureau, said on Friday.
We must learn the lesson from developed countries that relied heavily on quantitative easing
Coming only days ahead of the Central Economic Work Conference, which will set the government’s economic policy priorities for 2020, the comments send the strong signal that the PBOC believes an expansion of fiscal policy and continued economic restructuring, rather than monetary loosening, should play the leading roles in combating the economic slowdown next year.
“We must learn the lesson from developed countries that relied heavily on quantitative easing,” said Zhang, citing asset bubbles, the widening of the wealth gap and rising international currency and trade competitions as the negative consequences of those policies.
“When we face downward [economic] pressures from shifting to high-quality growth and external uncertainties, monetary policy should not leap forward alone,” Zhang said.
“Instead, it needs coordination with fiscal policy and structural reforms. The purpose is to improve our productivity and solve the distribution of income.”