The debate between economists on how China should deal with its economy is running high. CEIBS professor Wang Jianmao warns in the US edition of the China Daily curtailing inflation should be high on the agenda, not loosening the financial strings on banks.
The China Daily:
Many economists now expect further loosening of the bank’s reserve requirement ratio (RRR) in the first half of the year – allowing more credit back into the banking system – and then for interest rates to start being cut in the second half of the year.
Wang Jianmao, professor of economics at the China Europe International Business School (CEIBS) in Shanghai, worries the government has not quite put the inflation genie back in the bottle and cautions about loosening monetary policy.
He believes if the government pursues a policy of relaxing the RRR, it should actually also raise interest rates as a precaution.
“I think any lowering of the Triple R and an increase in interest rates would be a very bad combination. I think the government needs to increase interest rates at the same time so we don’t have a problem with inflation,” he says.
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- China’s inflation rate eases (business.financialpost.com)