China's Ex-Central Bank Chief Urges Action Against Deflation to Boost Economy
In a recent speech at the Bund Summit in Shanghai, former central bank governor Yi Gang emphasized the need for China to combat deflationary pressures in order to stimulate economic growth. Despite various policy support measures, the $18 trillion economy continues to face challenges such as declining profit margins, pay cuts, and subdued investor and consumer sentiment.
Yi highlighted the importance of addressing weak domestic demand, particularly in the areas of consumption and investment, as well as finding solutions for the struggling real estate market and local government debt issues. He stressed the significance of improving people's income prospects and job security, especially in light of the rising unemployment rate among young adults.
With China's economy expanding at a rate of 5.0% in the first half of 2024 but showing signs of slowing down in the second quarter, Yi called for proactive fiscal policies and accommodative monetary measures to stimulate growth. He also emphasized the need to achieve positive GDP deflator figures, despite challenges in the current economic landscape.
Investment bank UBS recently revised down its forecast for China's GDP deflator for 2024, citing a deeper property downturn that has led to lower product prices, weakened consumption demand, and increased price competition. This highlights the urgency for China to address deflationary pressures and implement effective policies to revitalize the economy.
In conclusion, it is crucial for China to focus on combating deflation and boosting domestic demand to drive economic growth and improve people's livelihoods. By addressing these key issues and implementing appropriate policy measures, China can work towards a more stable and prosperous economic future.