China urged to increase policy support for economy

China urged to increase policy support for economy

China Urged to Step Up Policy Support for Economy, Says Former PBOC Governor

Introduction

In a bid to achieve its annual growth target of around 5%, China has been urged to increase policy support for its economy. Yi Gang, the former governor of the People’s Bank of China (PBOC), highlighted the need for both policy adjustments and economic reforms. Despite growing factory output and retail sales, the country is facing challenges such as property investment decline and weak private firm confidence. In his remarks, Yi emphasized the importance of proactive measures to stimulate domestic demand and promote a virtuous economic cycle. He also suggested addressing local government debt risks and implementing reforms to boost consumption and support growth.

Strengthening Policy Support and Economic Reforms

Yi Gang, currently serving as the deputy head of the economic committee of the Chinese People’s Political Consultative Conference (CPPCC), has called for increased macroeconomic policy adjustments to effectively support domestic demand expansion. These measures are crucial in achieving the targeted growth rate of 5% for 2023. The government needs to boost confidence among private firms and address local government debt risks, which have limited their ability to contribute to economic growth. By taking proactive steps, China can stabilize and strengthen its economy.

Challenges Facing the Chinese Economy

The Chinese economy faces several challenges, including the slowdown in urbanization and an aging population. These factors are expected to lead to a decline in overall demand for home purchases. Recognizing this potential impact, Yi Gang has emphasized the need for long-term strategies to address this issue. He suggests that the central bank should utilize structural policy tools to support both the existing and improved housing demand. By doing so, the government can mitigate any negative effects on the economy arising from reduced demand in the real estate sector.

Reforms for Sustainable Growth

Yi Gang has also called for reforms in China’s system of residence permits, commonly known as “hukou.” These reforms would provide improved social welfare for millions of migrant workers who have migrated to cities, ultimately boosting consumption. By ensuring that migrant workers have access to better social welfare benefits, the government can contribute to a more equitable and inclusive growth model. Implementing these reforms will not only enhance social welfare but also stimulate domestic consumption, contributing to sustainable economic growth.

Conclusion

It is essential for China to enhance policy support for its economy while implementing necessary reforms to achieve its growth target of around 5%. Through increased macroeconomic policy adjustments, the government can effectively stimulate domestic demand and promote a virtuous economic cycle. The focus should be on improving private firm confidence, addressing local government debt risks, and utilizing structural policy tools to support the housing market. Additionally, reforms to the residence permits system and improved social welfare for migrant workers will help boost consumption and drive sustainable economic growth. By taking these steps, China can navigate the challenges it faces and move towards a more robust and resilient economy.

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