The Central Bank Adviser advised China to cut rates but not to use monetary flooding. Mr. Sheng Songcheng, an adviser to the People’s Bank of China pr PBOC was quoted by a financial magazine on Tuesday that Chinese Policy makers should pursue a Proactive Fiscal Policy. It should also cut on interest rates to support currently flogging economic growth in the country.
Since China does not face the same deflationary pressures as faced by the economies overseas, it should consider first its fiscal policy measures. The monetary policy matters will play a supporting role in this. Sheng was quoted by Yicai of saying so.
These comments came as a result of a debate that is going on in the circles of financial markets over the reality of China’s moving forward forcefully and fast enough to prevent a sharper economic slowdown in the country.
Economic Growth has cooled to about 30 year lows. It has chances of sliding below 6%. With the increase of factory price deflation, the industrial profits have greater chances of being pressurized with increased pressure on fresh investments and creation and maintenance of jobs.
But, the consumer inflation has recently jumped to an eight years high of 3.8%. The policy makers are concerned about the rising risks of debts and it poses a dilemma for People’s Bank of China.
Sheng also said that a recent jump in the prices of pork has definitely inhibited the monetary policy. He also added that the Core Inflation and the Producer Price Inflation maintains a downward trend.
He said that the monetary policy should not be a flood because of this reason. He emphasized on the need for structural adjustments that is still to be implemented.
Sheng said that the policy makers should pursue the fiscal solutions as a priority.