Policymakers have limited room to move these days, and together with the slowdown in economic growth and increasing systemic risks, these are the greatest difficulties China is facing today, said Huang Yiping, deputy director of the National School of Development at Peking University, Yicai.com reported.
Wang suggests that in the short-term, China should try to make room for macroeconomic policy, moderately loosening monetary policy to stabilize economic growth.
“We can’t change the Fed’s interest rate hike trend, we can only change our own policy framework,” said Huang, “such as increasing exchange rate flexibility and strengthening the management of cross-border capital flows.”
Huang also suggests to temporarily break through the 3% ceiling of the deficit-to-GDP ratio, considering the need for economic stability.
Huang thinks the deficit rate is only an indicator, and it is more important to check the balance sheet. At present, the central government’s balance sheet is healthy, but that of local governments looks troublesome.