Finance in the 21st Century: Is China Facing a Deflationary Trap?
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China's economy faced a roadblock post-COVID-19 pandemic; household savings increased, businesses reduced investments; concerns arise over a self-reinforcing cycle of declining spending and prices; consumer price index near zero for 16 months, producer price index negative for 24 months; Japan's three-decade deflationary trap serves as a cautionary tale; China's GDP fell from 76% of US level in 2021-23 to 67%, GDP per capita at 15% of US level; central banks should manage money like equity issuance; People's Bank of China (PBOC) lowered key policy rate from 1.7% to 1.5%, encouraging lower mortgage rates; stimulus package includes CN¥1 trillion liquidity, CN¥500 billion swap facility, and CN¥300 billion in loans; A-share market index rose over 20% post-stimulus; priorities include increasing fiscal spending, supporting the private sector, and job creation for vulnerable groups; experts Patrick Bolton and Haizhou Huang advocate for further measures to escape deflation.
#China #Deflation #Economy #Stimulus #Pboc #Gdp #MonetaryPolicy #Investment #PrivateSector #JobCreation
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