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China Won't Use QE or Indiscriminate Easing for Economy, Li Says

EconomyMar 15, 2019 16:04
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© Bloomberg. Li Keqiang on March 15. Photographer: Giulia Marchi/Bloomberg

(Bloomberg) -- China won’t resort to using quantitative easing or massive deficit spending in order to support the economy because such approaches would store up problems for the future, Premier Li Keqiang said.

“We certainly need to take strong measures to face the downward pressures,” Li told a news conference Friday at the close of the annual National People’s Congress session in Beijing. “We have policies in reserve for that purpose. We can use price tools such as reserve-requirement ratios, interest rates. We are not going towards monetary easing, but effectively supporting the real economy.”

China’s annual gathering of leaders that started last week has delivered a raft of policy initiatives, while maintaining a focus on using tax cuts and other “targeted” measures to address the weakness in output. China’s deepening slowdown has pushed unemployment higher, intensifying pressure on that calibrated stimulus strategy.

Tax cuts announced last week could exceed the proposed plan of 2 trillion yuan ($298 billion) in 2019. Included in that total is a cut of 3 percentage points to the top bracket of value-added tax aimed at benefiting the manufacturing sector. Policy makers have also cut bank reserve requirements multiple times since last year, releasing liquidity for lending. Li indicated use of that tool would continue.

Li confirmed that the tax cuts would take effect on April 1, and social security reductions would take effect from May 1.

“We won’t let the major economic indicators slide out of their proper range,” Li said.

China Won't Use QE or Indiscriminate Easing for Economy, Li Says
 

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