China has the policy space to support its economy. Continued flexibility of the RMB exchange rate is critical
Mr Barnett said China could implement monetary policy as needed to support economic activity, particularly through further interest rate cuts to stimulate the economy. What’s more, continued exchange rate flexibility is essential to facilitate adaptation to changing external circumstances.
At a time when the global economy is still struggling to recover from the effects of COVID-19, the sudden russia-Ukraine conflict adds uncertainty to that process. International Monetary Fund managing Director Kristalina Georgieva said in March 10: the IMF may cut its forecast for world economic growth.
The IMF said in 15, in the long run, the conflict between Russia and Ukraine may result in energy trade, supply chain network reconfiguration and payment fragmentation, and led to reconsider its holdings of foreign exchange reserves, it will fundamentally change the global economic and geopolitical order, and further increase the risk of the global economy fragmentation, especially in trade and technology.
Against this backdrop, how do you view China’s economic growth target of around 5.5% for this year? What are the major challenges that China’s economy face? What is the driving force of China’s policy? What are the new opportunities under the new circumstances? How to view the difficult problem of China’s consumption recovery and growth? How will China continue to attract more foreign investment?
To address these issues, Steven Alan Barnett, chief representative of the IMF in China, was interviewed by 21st Century Business Herald.
China has enough policy space to support the economy.
In the 21st Century: The government work report they has set the main development targets for this year, including a GDP increase of around 5.5 percent. What do you think of that goal? What is the main message?
Barnett: We need to put the 5.5 percent target in context. It may be lower compared with China’s growth rate of 8.1% in 2021, but it is ambitious compared with the economy’s growth rate at the end of last year. The recent data from the National Bureau of Statistics shows strong economic performance in January and February. However, as for this year’s growth target, the government work report noted that “arduous efforts will be required to achieve it”.
These efforts include the provision of supportive macroeconomic policies. To this end, fiscal policy can provide important support for growth, particularly by implementing policies aimed at strengthening social protection and promoting green investment.
My focus on the government work report is on the policies it proposes for the short and medium term. In the medium term, accelerating key real sector reforms will help ensure sustainable growth. This includes policies aimed at further opening domestic markets, ensuring competitive neutrality between private and state-owned enterprises, and boosting consumption.
Post time: Mar-21-2022