Hey there! 🚀 Big news from the China Finance 40 Forum (CF40) this week! Analysts are calling on policymakers to step up their game by slashing interest rates and ramping up government spending to kickstart demand in the economy. 💰💡
China's been trying to pump up economic growth with some cool moves lately, like cutting interest rates. But some folks are worried this could hurt banks' profits. 📉
The CF40 report says, \"Time to act now!\" Reducing policy rates is seen as a must-do to tackle the lack of demand. Sure, the central bank is careful about banks' bottom lines, but the report highlights that doing nothing could be worse. Weak demand might lead to more bad loans and put even more pressure on banks. 😬
This year, the five-year Loan Prime Rate (LPR), which is a big deal for mortgages, got cut by a total of 60 basis points over three tweaks. Recently, policymakers also chopped the policy rate by 20 basis points and lowered the reserve requirement ratio for financial institutions by 50 basis points. 📊
CF40's senior fellow Zhang Bin said, \"Yeah, some banks might feel the heat, but that's no reason to hold back on cutting rates. The central bank can handle any troubled banks.\" 🏦🔥
The report also suggests that to get people spending, government spending should grow more than the combined targets for GDP and inflation. So, if China is aiming for 5% GDP growth and 2% inflation next year, government spending should crank up by over 7%. 📈
Another CF40 senior fellow, Guo Kai, backed up Zhang's points. He emphasized the need for a clear nominal GDP target to deal with low-interest-rate challenges. If real GDP growth slows down, it's time for policymakers to boost inflation through expansionary fiscal or monetary policies to keep the economy humming. 🎯
Analysts are feeling upbeat about the recent policy package. They reckon that if these measures are rolled out effectively, they'll maximize the benefits and set the stage for sustainable economic growth in the future. 🌟🚀
Reference(s):
cgtn.com
