Continuity, stability key policy goals

Chinese economic policies will maintain stability and continuity to enhance international macroeconomic policy coordination and tackle headwinds, economists said.

The importance of international collaboration in macroeconomic administration has been stressed by Chinese leaders as they have drawn a plan for more comprehensive opening-up.

Beijing’s stance comes amid growing spillover effects of policies among countries and, according to forecasts by the World Bank and the International Monetary Fund, the likelihood that global growth may lose some steam this year, economists said.

One of the key ways to strengthen policy coordination is to maintain the yuan’s exchange rate at a reasonably stable equilibrium, which can also avoid negative spillover effects and foster crossborder trade and investment, said Sheng Songcheng, former director of the statistics department of the People’s Bank of China.

Prudent monetary policy and proactive fiscal policy will strengthen domestic demand as well as promoting exports and GDP growth for China’s trade partners, Sheng told China Daily in an exclusive interview on April 30.

The “prudent monetary policy” will be properly managed－neither too tightly nor too loosely－thus avoiding massive liquidity injections while maintaining liquidity at reasonably adequate levels. That will help enhance macroeconomic policy coordination with trade partners without exporting inflationary or deflationary factors, he said.

Zhou Qiangwu, director general of International Economics and Finance Institute of the Ministry of Finance, said proactive fiscal policy will emphasize tax cuts, and the 2 trillion yuan ($297 billion) in reductions also will help secure economic growth and support supply-side restructuring reforms.

In the short term, the economic policies are meant to maintain continuity and stability, said Xu Xiujun, director of the division of International Political Economy at Institute of World Economics and Politics of the Chinese Academy of Social Sciences.

President Xi Jinping announced a package of proposals to advance high-quality development under the Belt and Road Initiative at a forum on April 26. He said the international community should join in producing a “meticulous painting” of the BRI to continuously promote its high-quality development.

Xi said one of the key ways to deepen opening-up reform is more effectively implementing international macroeconomic policy coordination. Other measures include broadening market access for foreign investment, strengthening international cooperation in intellectual property rights protection and increasing imports of goods and services. Xi also mentioned maintaining the exchange rate at a reasonably stable equilibrium.

“The Chinese central bank has never promoted exports through depreciating the yuan to offset the influence of US tariffs,” Sheng said.

The yuan’s exchange rate is affected much more by market sentiment now, as the market-oriented reform of the foreign exchange rate regime deepens, he said. Capital flows also play a more significant role in determining the rate, Sheng added.

Given China’s weight as the second-largest economy, biggest exporter and third-largest importer, it’s good for the nation to consider spillover effects on others before adjusting its fiscal and monetary policies, economists said.

China will continually participate in global governance reform, Zhou said. “We won’t establish new systems or deny existing rules, but adjust, improve and innovate the parts that are not reasonable or appropriate. We always promote coordination and cooperation with international organizations to make the global governance system more fair and inclusive,” he said.

China will provide proposals for World Trade Organization reforms and enhance communication with member countries and regions to deal with trade issues. That will strengthen the WTO and jointly maintain free trade and the multilateral trade system, he said.