From CNBC: 2024-09-06 02:59:16

Yi Gang, former Governor of the People’s Bank of China, emphasizes the need for China’s policymakers to focus on boosting domestic demand and fighting deflationary pressures at the Bund Summit in Shanghai. Proactive fiscal and accommodative monetary policies are deemed crucial as China faces low consumer prices amid lackluster domestic demand.

Yi Gang expects China’s consumer price index to steer above zero by the end of the year, with the producer price index likely reaching zero. Meanwhile, Zou Lan, director of the PBoC’s monetary policy department, hints at potential reserve requirement ratio cuts. Chinese policymakers push for boosting consumption through a trade-in policy amidst a sluggish real estate market.

Chinese consumption remains weak post-pandemic with major cities such as Beijing and Shanghai witnessing a decline in retail sales in July. Low consumer sentiment stems from uncertainty about future income and the wealth impact of the real estate market slump. Former Bank of Japan head, Haruhiko Kuroda, warns against prolonged deflation, emphasizing its adverse effects on wage determination.

Read more: China should focus on fighting deflationary pressure