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China's Central Bank's Announcement amid Rising Deflationary Pressures
The People's Bank of China (PBOC) declared on Thursday its intent to bolster macroeconomic policy adjustments. Their goal is to support the economy and foster price recovery, in light of increasing signs of deflationary pressure.
In its statement after a three-monthly monetary policy committee meeting, the PBOC asserted it would retain ample liquidity and stimulate reasonable credit growth.
Challenges to the Chinese Economy
Underscoring the complexity and severity of the present external environment, the Chinese central bank cited a slowdown in global economy, trade, and investments. Moreover, inflation levels are experiencing a downward trend, and interest rates in developed nations remain high.
While China’s economy is on the path to recovery, there are lingering obstacles including inadequate effective demand and fragile social expectations.
The Central Bank's Strategy
The central bank will escalate macroeconomic policy adjustments to continually stabilize and improve economic conditions. It aims to support the rebound of prices from their current low levels and maintain a viable price level.
Earlier this December, China's principal leaders, during a critical meeting to outline the economic trajectory for 2024, pledged to put in place a monetary policy that is flexible, moderate, precise, and effective.
Rising Deflationary Pressures and Policies for Recovery
In November, consumer prices in China experienced their sharpest fall in three years, and factory-gate deflation surged. These factors spotlight escalating deflationary pressures as weak domestic demand throws China's economic recovery into question.
China has recently unveiled a range of measures to bolster its weak post-pandemic economic recovery, as a real estate downturn, local government debt risks, and slow worldwide growth prove to be deterrents.
The Future of the Chinese Economy
China's economic growth is predicted to meet the state's goal of around 5% this year, and Beijing is set to retain this target for the coming year.
The PBOC stated it would foster the stable and healthy growth of the real estate market and cater to the legitimate financing needs of property companies across various forms of ownership. Moreover, the central bank also plans to augment financial aid to businesses and pertinent groups to stabilize and grow employment, attract and stimulate more private investments.
Additionally, China will ensure the stability of the yuan and is determined to prevent the risk of exchange rate overshooting.
