Economic growth is primary issue to be addressed

Editor's note: China's central bank said on Jan 4 that it was cutting the ratio of cash that banks must hold as reserves by 100 basis points, or 1 percentage point of the reserve requirement ratios. Yu Yongding, a researcher of finance with the Chinese Academy of Social Sciences, commented in an interview published by Guancha.cn on Tuesday:

The move will inject about 1.5 trillion yuan ($222.2 billion) into the market, boosting market liquidity and providing funds for the cash-thirsty medium and small-sized enterprises. That's how the central bank spokesperson commented on the move.

Some others observe that the cuts in the RRR, which is the first this year, have been widely expected, especially after a spate of weak data in recent months showed China's economy was continuing to lose steam.

In my opinion, what the Chinese economy lacks is not money, but confidence, which has contributed to the building up of downward pressure and pessimism.

Since some enterprises are reluctant to apply for loans because of the low return on investment and uncertainties in their business caused by internal and external factors, the government must improve the investment and business environment and increase its own investment in the economy, which would directly demonstrate its confidence in the economy.

It is impossible to use only monetary policies to leverage private investment, as more fiscal, industrial and social policies are needed to form a combination blow to pivot the whole economy.

And since the housing market absorbed considerable liquidity released by previous loosening of monetary policies, private investment is unlikely to flow back into the real economy until the irrational rise of property prices is checked.

Although they are important, the foremost challenge now is not the depreciation of the currency or the quality of the economy, but to ensure the growth momentum is maintained.

The trade dispute with the United States is affecting the economy. But the main challenge is internal. China's economic growth has declined for eight consecutive years since 2010. Now is the time to reflect on how to address some chronic problems, including local government debt, shadow banking and enterprises' high leverage ratios, which must be controlled, but not in a hasty manner.

The government should further increase its investment in technology innovation and infrastructure construction to boost economic growth. Urbanization, renovation of shanty towns, upgrading underground utility networks and other public facilities all call for fresh inputs, which will stoke the growth of relevant industries and attract more private investment, so as to boost confidence in the economy.