Money and Finance
ABSTRACT
The Chinese economy has slowed down following its post-pandemic reopening in early 2023: industrial production and retail sales have been soft; international trade activity has been tepid; though the authorities have since stopped publishing this statistic, the youth unemployment rate was surging; and, in spite of various measures to stabilize the real estate sector, the real estate correction is ongoing, with Tier 2 and Tier 3 cities hit hardest. Meanwhile inflation is ultralow, reflecting weakness in effective demand; the producer price index has been soft, raising concerns about deflationary trends and firms’ profit margins; and households’, nonfinancial corporations’, and local governments’ debt-to-GDP ratios have increased in the past decade, with the rise in the private sector’s debt ratio implying that deflation could pose a risk to financial stability. If a deflationary mindset becomes widespread, it could be quite harmful to the economy, therefore the Chinese authorities have eased monetary policy. However, China may require a well-directed fiscal stimulus and well-designed large-scale employment programs to stabilize its economy. It will also need to advance its scientific and technological capabilities and innovation systems to enhance competitiveness and raise productivity. Insights drawn from Irving Fisher, John Maynard Keynes, Hyman Minsky, and modern money theory can be useful in analyzing China’s current challenges and transformational goals. It can also facilitate the formulation and implementation of an economic strategy that can address its current challenges and transformational goals.
Key Words: China; Development; Current Economic Conditions; Transformational Growth; Irving Fisher; John Maynard Keynes; Hyman Minsky; Modern Money Theory
Cross Reference: Papers,Working Paper,Money and Finance
WP 15 China’s Economic Challenges: A Perspective Based on Fisher, Keynes, Minsky, and Modern Money Theory
Tanweer Akram, Citibank | February 2024ABSTRACT
The Chinese economy has slowed down following its post-pandemic reopening in early 2023: industrial production and retail sales have been soft; international trade activity has been tepid; though the authorities have since stopped publishing this statistic, the youth unemployment rate was surging; and, in spite of various measures to stabilize the real estate sector, the real estate correction is ongoing, with Tier 2 and Tier 3 cities hit hardest. Meanwhile inflation is ultralow, reflecting weakness in effective demand; the producer price index has been soft, raising concerns about deflationary trends and firms’ profit margins; and households’, nonfinancial corporations’, and local governments’ debt-to-GDP ratios have increased in the past decade, with the rise in the private sector’s debt ratio implying that deflation could pose a risk to financial stability. If a deflationary mindset becomes widespread, it could be quite harmful to the economy, therefore the Chinese authorities have eased monetary policy. However, China may require a well-directed fiscal stimulus and well-designed large-scale employment programs to stabilize its economy. It will also need to advance its scientific and technological capabilities and innovation systems to enhance competitiveness and raise productivity. Insights drawn from Irving Fisher, John Maynard Keynes, Hyman Minsky, and modern money theory can be useful in analyzing China’s current challenges and transformational goals. It can also facilitate the formulation and implementation of an economic strategy that can address its current challenges and transformational goals.
Key Words: China; Development; Current Economic Conditions; Transformational Growth; Irving Fisher; John Maynard Keynes; Hyman Minsky; Modern Money Theory
Cross Reference: Papers,Working Paper,Money and Finance