After the unexpectedly disastrous macroeconomic data in April proved that those who were so certain that the bottom was in Q1 have been very wrong, the People’s Bank of China has cut the reserve requirement ratio by 50 basis points. Unfortunately, with debt deflation and worsening capital flow situation, cutting RRR is going to be totally useless in stimulating credit.
So here comes Wen Jiabao, who has just been quoted saying that stabilising economic growth is now becoming a more important. According to Xinhua, Wen Jiabao has just been travelling various places across the country.
While he thinks that economic growth is currently within the target range, with challenges both inside and outside of the country, it is important to continue proactive fiscal policy and prudent monetary policy in order to achieve the right balance between stable and rapid economic growth, rebalancing the economy and price stability. In the meanwhile, stabilising growth is of a greater importance, and the government would like to “fine-tune policies in order to expand domestic demand and stabilise external demand”.
Now we have heard that many times, but they have had not much success in expanding domestic demand, if that means consumption, while I would have no idea how on earth can the government stabilise external demand while the European economy (or as we know it, the second biggest trading partner of China) is going into a recession (more on the Euro crisis later).
This article originally appeared here: After disastrous data, Wen Jiabao thinks stabilising growth is now a higher priority
Also sprach Analyst – World & China Economy, Global Finance, Real Estate
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