China stimulate economy through monetary policy

Noam Stiekema

China has options for maneuver in its monetary policy to support the economy. That said Sunday the Prime Minister of the Celestial Empire – Li Keqiang. This comment sent a signal that the authorities in Beijing can not afford to do much more to maintain growth. The Prime Minister speaks at a press conference at […]

Li Keqiang

Li KeqiangChina has options for maneuver in its monetary policy to support the economy. That said Sunday the Prime Minister of the Celestial Empire – Li Keqiang. This comment sent a signal that the authorities in Beijing can not afford to do much more to maintain growth. The Prime Minister speaks at a press conference at the end of the annual session of China’s parliament. Li Keqiang tried to calm fears about lagging economy, promising it to grow by “reasonable pace”, although the task will not be easy.

The Prime Minister assured the audience that politicians will support the if China stimulate economy in case growth is at risk of violation of “lower limit”, or if threatens employment and income growth.

“In recent years we have a policy of strong short-term incentives. We can say that our opportunities for political maneuvers are relatively large, and the tools in our toolbox – relatively much”, said Li. “If the slowdown reflects employment and income, we will stabilize policies and long-term market expectations for China”, he said during a two-hour briefing.

As to the government’s plans for growth of “around 7%” instead of the previous “around 7.5%” the prime minister said: “It seems that economic growth has been revised down, but actually achieving this goal will not be easily”. The target growth rate of China is 7%, which is the lowest in 11 years. If real growth coincide with expectations, the expansion of the economy of the Celestial Empire will be the lowest in the last quarter century.

Li Keqiang on the authorities in Beijing is a challenge to ensure the economic growth of around 7% this year, as the value of the Chinese economy already exceeds 10 trillion USD. However, Li reiterated that the authorities will do their utmost to maintain growth “reasonable”. He denied the comments of many analysts that China is the largest exporter of deflation in the world. The Chinese economy has the lowest rate of acceleration in the last 24 years in 2014. The increase of 7.4% led many analysts to come up with gloomy forecasts for the second force in the world economy. Asked if he was worried about the growing financial risks, Li acknowledged dangers, but said China can prevent systemic risks threaten economic development.

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