Friday, May 27, 2022


China calls on major economies to coordinate macro-economic policies as it faces an economic slowdown

China has called on major world economies to spur growth by coordinating their macro-economic policies as the Chinese economy faces downward pressure from shrinking demand and supply chain disruptions owing to stringent pandemic related restrictions. President Xi in his virtual address at the 2022 Davos World Economic Forum, warned against the effects of raising interest rates too much too quickly, saying that such measures could threaten global financial stability China is battling a sharp economic slowdown.

China’s central bank cut its benchmark lending rates again on Thursday amid concerns about an economic slowdown in the world’s second-largest economy. It has been reducing the key lending rates since December last year to maintain the liquidity and economic activities. Beijing’s latest measures came as the country reported that its economy expanded 8.1% in 2021, however, the growth slowed to 4% in the final quarter of the year and is expected to struggle even more because of Covid and a deepening real estate crisis.

“The global industrial chains and supply chains have been disrupted. Commodity prices continue to rise. Energy supply remains tight. These risks compound one another and heighten the uncertainty about economic recovery,” Xi said during a speech delivered online. Many global policymakers are grappling with rising inflationary pressure and starting to end their pandemic-era stimulus plans. As per reports, the Federal Reserve, the European Central Bank, the Bank of England, Central banks in Eastern Europe and Latin America have either raised interest rates aggressively to cool inflation or have announced plans to do so in near future. China is also anticipating a spillover effect caused by the Fed’s interest rate hikes. “If major economies slam on the brakes or take a U-turn in their monetary policies, there would be serious negative spillovers,” Xi said. “They would present challenges to global economic and financial stability and developing countries would bear the brunt of it.” China which is the only major economy to grow in 2020 is grappling with the challenges of maintaining momentum while holding firm to its zero-Covid strategy.

State media reported, China’s central and local governments are expediting the rollout of major infrastructure projects as the country faces growing downward economic pressure. China’s top economic planning agency, the National Development and Reform Commission (NDRC) announced on Tuesday that it will moderately front-load infrastructure investment and steadily push forward the 102 mega projects earmarked for the 14th Five-Year Plan period (2021-25), in light of more uncertainties in the first quarter of 2022.

State media reported that the measures will be aimed at addressing contracting domestic demand and sluggish consumption growth, the two major weak points in the Chinese economy at the moment. The report pointed to near-flat infrastructure investment for 2021, which grew at a mere 0.4 percent annual growth rate, saying that boosting this area will help combat sluggish domestic demand.

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