Economic policy remains on course despite headwinds: China Daily editorial

Although policymakers are set to fine-tune it to cope with the headwinds being encountered both at home and abroad, China’s basic economic policy stance is to remain largely unchanged.

According to the statement issued after the meeting of the Political Bureau of the Communist Party of China Central Committee on Tuesday, in the second half of this year, the country will seek to “maintain a stable economic and social situation” and adhere to the basic principle of “seeking progress while maintaining stability”.

The statement said the country will continue to adopt a pro-active fiscal policy and a prudent monetary policy with the aim of maintaining stable and healthy economic development. From this, it is clear that the macroeconomic regulatory stance remains fundamentally unchanged.

But as policymakers at the meeting warned, deepening economic restructuring and the rising tide of global trade protectionism have combined to put downward pressure on China’s growth potential.

Domestically, the debt-cutting initiative has led to continual tightening of financial regulation, which has led to reduced liquidity and risked exacerbating financial exposure.

Internationally, the continuing China-US trade confrontation has affected China’s exports and GDP growth this year.

Tuesday’s meeting sent a message that fiscal policy is to play a bigger role in expanding domestic demand and promoting economic restructuring.

Monetary policy, meanwhile, will also be adjusted to ensure liquidity is “reasonably ample” to ensure the country’s growth can be kept “within a reasonable range”.

Meanwhile, it was determined at the meeting that the country will improve its policy “foresight, flexibility and effectiveness” and better manage the “pace and intensity” of deleveraging to redress the adverse effects of the policy.

Liquidity loosening, however, may bring new challenges as the increased money may flow into asset investments such as real estate, as past experiences have shown.

Policymakers, therefore, have made a pre-emptive move by saying at Tuesday’s meeting that property price rises should be “resolutely stemmed”, wording that is in stark contrast with previous claims that property prices should be prevented from “rising excessively fast”.

Given that property prices in major cities have skyrocketed in the past decade, only by strictly controlling money flowing into asset investments can the loosened monetary stance be properly used to boost the real economy, maintain stable growth and ward off the eruption of major financial risks.