China’s economic policy diverging from US while ‘putting own needs first’, central bank says
- Head of monetary policy says China’s economic focus is primarily on maintaining stability in its own financial markets
- But diverging policies with the US may result in different interest rates and currency exchange rates that would be likely to cause unintended hot capital flows
China has shrugged off the monetary policy shift by the US Federal Reserve and says maintaining stability in its own domestic financial markets is the main priority at this stage in its post-pandemic economic recovery, which is further along than that of the United States.
The position was relayed on Tuesday by the head of the central bank’s monetary policy department, Sun Guofeng. He acknowledged that the People’s Bank of China (PBOC) has taken notice of recent market discussions over a potential tightening by the Fed, but stressed that China’s financial markets are operating smoothly.
“Due to the time difference in terms of pandemic control and economic recovery, the difference in monetary policies of the US and China is very normal,” Sun said at a press conference while also noting that the two economies interact with each other closely due to the effects of globalisation.
China’s short-term priority lies in sustaining growth, while the United States is focused on reining in inflation. These diverging policies may result in different interest rates and currency exchange rates that could, for example, cause unintended speculative capital flows.