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Prof. Yi Gang: Some Features of Current Economic Performance

Sep 26-2023   



In a commentary in CPPC Daily, Prof. Yi Gang of the NSD analyzed the major characteristics of China’s current economic operation and offered advice accordingly. He is also a member of CPPCC Standing Committee, Deputy Director of its Economic Commission, and Director of the governing council of China Finance Association.

 

International experiences show that it usually takes about one year for consumption to recover after a pandemic, wrote Prof. Yi. China has just reached the half-year mark, so he called for confidence and patience. As market entities continue to fix their balance sheets, households will gradually increase consumption expenditures, thereby creating incomes and more consumption.

 

He also noted that economic recovery had slowed down in the second quarter of the year, and PMI of the manufacturing sector had stayed in the contraction zone for three months in a row. These pointed to weakness in both endogenous momentum of the economy and market confidence. He advised moderately stepping up macro controls, substantially supporting the expansion of domestic demand, and facilitating a virtuous cycle of the economy, so that this year’s expected growth target of 5% can be smoothly achieved through joint efforts.

 

He summed up some salient features of current economic performance, including households’ apparent moves to increase savings and reduce debts, divergent performances of enterprises, and rising risk in local government debts. Over the long term, the total housing demand might go down one notch due to slower pace in urbanization and an aging population, he said. As international demand slackens, China is confronted with a significant challenge to maintain export performance. Amid a stable job market, he drew attention to the structural mismatches, which might exist for years to come as AI seems to be on way to phase out mental work positions. He also noted that in the first half of the year, monetary policy was set to amplify counter-cyclical adjustments, contributing to the stabilization of the overall economic performance. The strengthening of the US dollar, coupled with a peak of foreign exchange purchase in the summer break, caused yuan to depreciate, before bouncing back recently.

 

Accordingly, he advised making good use of structural monetary policy and crafting city-specific policy to meet inelastic demand for housing and people’s needs for better housing. Another measure is to spur urbanization through household registration reforms, thereby unleashing consumption potential. Prof. Yi cited calculations that showed that such reforms might increase by 23% the consumption intentions of farmers and residents newly settling down in cities. He also proposed moderately raising electricity prices during summer peak season to reduce wastefulness and carbon emissions.

Prof. Yi Gang: Some Features of Current Economic Performance

Sep 26-2023   



In a commentary in CPPC Daily, Prof. Yi Gang of the NSD analyzed the major characteristics of China’s current economic operation and offered advice accordingly. He is also a member of CPPCC Standing Committee, Deputy Director of its Economic Commission, and Director of the governing council of China Finance Association.

 

International experiences show that it usually takes about one year for consumption to recover after a pandemic, wrote Prof. Yi. China has just reached the half-year mark, so he called for confidence and patience. As market entities continue to fix their balance sheets, households will gradually increase consumption expenditures, thereby creating incomes and more consumption.

 

He also noted that economic recovery had slowed down in the second quarter of the year, and PMI of the manufacturing sector had stayed in the contraction zone for three months in a row. These pointed to weakness in both endogenous momentum of the economy and market confidence. He advised moderately stepping up macro controls, substantially supporting the expansion of domestic demand, and facilitating a virtuous cycle of the economy, so that this year’s expected growth target of 5% can be smoothly achieved through joint efforts.

 

He summed up some salient features of current economic performance, including households’ apparent moves to increase savings and reduce debts, divergent performances of enterprises, and rising risk in local government debts. Over the long term, the total housing demand might go down one notch due to slower pace in urbanization and an aging population, he said. As international demand slackens, China is confronted with a significant challenge to maintain export performance. Amid a stable job market, he drew attention to the structural mismatches, which might exist for years to come as AI seems to be on way to phase out mental work positions. He also noted that in the first half of the year, monetary policy was set to amplify counter-cyclical adjustments, contributing to the stabilization of the overall economic performance. The strengthening of the US dollar, coupled with a peak of foreign exchange purchase in the summer break, caused yuan to depreciate, before bouncing back recently.

 

Accordingly, he advised making good use of structural monetary policy and crafting city-specific policy to meet inelastic demand for housing and people’s needs for better housing. Another measure is to spur urbanization through household registration reforms, thereby unleashing consumption potential. Prof. Yi cited calculations that showed that such reforms might increase by 23% the consumption intentions of farmers and residents newly settling down in cities. He also proposed moderately raising electricity prices during summer peak season to reduce wastefulness and carbon emissions.