Struggling to haul itself to sustainable growth? Officials at China’s central bank have begun to call for a fundamental change in strategy, warning that interest rate cuts have become an increasingly blunt tool.
by Ambrose Evans-Pritchard
Telegraph.co.uk
China is at mounting risk of a Japanese-style “liquidity trap” as monetary policy loses traction and the economy approaches credit exhaustion, forcing a shift towards Keynesian fiscal stimulus.
Officials at the Chinese People’s Bank (PBOC) have begun to call for a fundamental change in strategy, warning that interest rate cuts have become an increasingly blunt tool.
They cannot easily stop companies hoarding cash or halt the slide in private investment.
Sheng Songcheng, the PBOC’s head of analysis, set off a storm last month by warning that the economy had “started to show some signs of being caught in a liquidity trap”.