The fear and risk of China's economy experiencing deflation is getting worse, as many implemented policies have failed to raise inflation back to a normal level. China is facing an uncertain global outlook and soft commodity prices, along with a property market downturn and factory overcapacity throughout the country.
This article (Link Here) discusses the many reasons policymakers in China are worried and what they believe needs to happen next in order to raise inflation rates and improve the Chinese economy.
Do you believe that a permanent liquidity injection is necessary to head off the risk of deflation?
Is quantitative easing the right choice?
It seems like a permanent liquidity injection would have to lead to negative long term effects. I would be interested in reading an article that opposed Hao and Ligang's beliefs. As for quantitative easing, I believe China should have looked into other options in fighting deflation. I think QE should only be used in emergency economic situations.
ReplyDeleteI agree with Tyler. We saw that quantitative easing was effective for the US after the 2008 crisis, but that was a very dire situation. Without the help of QE, who knows where we would be right now? As for China, it would seem that they should further pursue other solutions to stabilize their deflation before jumping to something as radical as QE.
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