THREAD: A recent interview with Xiao Gang and Liu Yuanchun on China’s 2020 growth outlook, employment, fiscal&monetary policies, small&medium-sized banks’ challenge in supporting businesses etc: new.cf40.org.cn/uploads/202006… #covid19 #economicstimuluspackage
While there have been some controversies over whether China’s calling for “developing new monetary policy instruments that can directly stimulate the real economy” is simply a temporary move, Xiao believes these arrangements are extensions of the function of monetary policy …
… and represent a step forward for monetary policy theory, and therefore not just temporary measures. Part of the significance of this call in the 2020 Government Work Report is that it will help improve the transmission mechanism of the monetary policy.
The Report also mentioned M2&social financing should grow “notably” faster than last year.While “notable” is not a precisely measurable indicator,Liu says it’s an important reflection of China’s monetary policy stance, that is, the prudent monetary policy should be more flexible.
The growth of M2 was 2.4% up in April this year from the end of last year, and the growth of the stock of social financing increased by 1.3%, indicating there’s further room for the two indicators to increase, especially for loans and bond securities, according to Liu.
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