China’s economic growth next year to be supported by fiscal policy, ‘limited’ need for ‘aggressive’ monetary easing

Huang Yiping, a former member of the People’s Bank of China’s (PBOC) monetary policy committee, sees average growth this year at around 8 per cent
China’s economy is slowing under headwinds from an energy shortage to a slump in the property sector

China's economic recovery

Bloomberg

Published: 12:16pm, 2 Nov 2021

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China’s fiscal policy will provide the main support to economic growth next year while significant monetary easing is unlikely, according to a former adviser to China’s central bank.

“The economy overall really is still OK and we will see average growth this year at around 8 per cent,” Huang Yiping, a former member of the People’s Bank of China’s (PBOC) monetary policy committee, said in an interview with Bloomberg TV.

“So the need for aggressive easing is quite limited.”

The PBOC will have to act if growth continues to slow, but the US Federal Reserve’s plan to normalise policy will narrow the room for action, said Huang, currently a professor at Peking University’s National School of Development.

The main job for supporting growth, I think, will be with the fiscal policy next year

Huang Yiping

“Monetary policy will probably remain flexible, and actions probably will be structural,” he said, adding that this could mean targeted easing and lending to small businesses.

“The main job for supporting growth, I think, will be with the fiscal policy next year.”

China’s economy is slowing under headwinds from an energy shortage to a slump in the property sector.

Surging commodity costs and increasingly frequent coronavirus outbreaks also continue to weigh on domestic demand, with an official gauge showing the manufacturing sector contracted for a second month.

China’s falling factory activity a sign of economic woes ahead

The PBOC has refrained from cutting banks’ reserve requirement ratio since a reduction in July, and has kept policy interest rates steady since early last year.

However, the Ministry of Finance recently urged local governments to speed up borrowing by the end of November after almost a year of slow bond issuance.

Huang said growth is likely to see a further slowdown in the coming months before it turns around.

While long-term goals such as deleveraging the property sector and reducing carbon emissions have inflicted short-term pain on the economy, Huang said he is not “too worried” about growth as authorities are now fine-tuning policies in these areas.