China’s central government should borrow more to lift domestic demand through supportive monetary and fiscal policy, a Chinese economist has urged.
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“If I can make a recommendation, what I think we could also do is to put together a more aggressive macroeconomic policy using central government leverage or adding central government leverage,” Huang Yiping, a professor at Peking University and dean of its National School of Development, said at the Bund Summit in Shanghai on Saturday.
The potential injected liquidity can be used to repair the balance sheets of household enterprises, financial institutions and local governments, which have all been struggling financially primarily due to a prolonged property crisis in the country, Huang said during a panel discussion.
“If we can do that, the central government’s leverage room will rise, but I think we’re going to see a big boost to domestic demand,” said Huang, who is also a member of the monetary policy committee of the People’s Bank of China.
The outstanding debt of China’s central government accounted for about 22 per cent of the country’s gross domestic product, Huang said, placing it in the lower-middle tier globally.
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Along with the property sector and weak domestic demand, the world’s second-largest economy has been grappling with other economic challenges, including a trade war with the United States and a rapidly ageing population.