London Daily

Focus on the big picture.
Thursday, Sep 18, 2025

China shouldn’t risk West’s large monetary easing of last decade to combat economic slowdown, central bank warns

China shouldn’t risk West’s large monetary easing of last decade to combat economic slowdown, central bank warns

PBOC pressured to cut interest rates to stabilise economic growth; deputy director of research dept says country should use ‘institutional advantages’ instead. Comments come days ahead of the Central Economic Work Conference, at which top China officials will set the economic policy priorities for 2020

The economic problems created by the aggressive monetary policy easing undertaken by Western central banks in response to the global financial crisis a decade ago are a clear warning to China not to go down the same path to combat its current economic slowdown, according to an official from the central bank.

China, instead, should use the institutional advantages unique to China to address the country’s economic problems, Zhang Xuechun, deputy director of the People’s Bank of China’s research bureau, said on Friday.

The central bank is under continuous domestic pressure to cut its interest rates further and faster to help stabilise economic growth, which is expected to drop below 6 per cent in the fourth quarter this year and fall further next year.

Coming only days ahead of the Central Economic Work Conference, which will set the government’s economic policy priorities for 2020, the comments send the strong signal that the PBOC believes an expansion of fiscal policy and continued economic restructuring, rather than monetary loosening, should play the leading roles in combating the economic slowdown next year.



“We must learn the lesson from developed countries that relied heavily on quantitative easing,” said Zhang, citing asset bubbles, the widening of the wealth gap and rising international currency and trade competitions as the negative consequences of those policies.

“When we face downward [economic] pressures from shifting to high-quality growth and external uncertainties, monetary policy should not leap forward alone,” Zhang said.

“Instead, it needs coordination with fiscal policy and structural reforms. The purpose is to improve our productivity and solve the distribution of income.”

China should use its “institutional advantages” – such as its ability to plan and execute five-year or even longer-term structural reform plans without electoral pressure – to solve its current economic challenges, Zhang said.

Between 2008 to 2014, the US Federal Reserve cut interest rates aggressively and conducted four rounds of quantitative easing, buying US Treasury bonds and mortgage-backed securities directly from the market to inject large amounts of liquidity into the financial system.

The Bank of Japan also launched two rounds of quantitative monetary easing from 2013, involving significant bond purchases of 80 trillion yen annually (US$730 billion), and introduced negative interest rates in January 2016.



The European Central Bank implemented an asset purchase programme between 2015 and 2018, spending €2.6 trillion (US$2.9 trillion) on government bonds, corporate debt and asset-backed securities. In September 2019, it restarted quantitative easing measures and cut its bank deposit rate to an all-time low of minus 0.5 per cent.

The Bank of England implemented three rounds of quantitative easing from 2009, purchasing £435 billion (US$560 billion) of government bonds in total.

“We should cherish the monetary leeway we have, enhance coordination with fiscal policy and strongly push forward supply-side structural reform,” Zhang told the 2019 China Finance Annual Forum in Beijing.

The US Federal Reserve has cut benchmark interest rates three times this year, with US President Donald Trump calling for more aggressive moves to boost the US economy, even talking about negative interest rates.

“[Quantitative easing] and negative interest rates will have their limit, though we don’t know how far it can go yet. But think about it, if the [US Federal Reserve] cut its benchmark rate when its economy is at a 30-year high and its unemployment rate is at a 30-year low, how can it address a [future] economic recession?” Zhang added.

In contrast, the PBOC has eased its monetary policy only slightly, given concerns about putting downward pressure on the yuan exchange rate and adding to the recent rise in the country’s debt level to an all-time high.

China cut its three key interest rates – the medium-term lending faculty rate, the loan prime rate and the 7-day reserve repo rate – by a mere 5 basis points earlier this month.

The Chinese central bank is expected to continue targeted liquidity injections and continuing to push banks to lend more to smaller private-sector businesses, who account for the majority of the nation’s employment.

The State Council, the country’s cabinet, has continued to rule out a resumption of the all-out stimulus it undertook in response to the global financial crisis in light of the problems that policy created in the China economy.

It has also downplayed the importance of achieving a particular growth target since employment has remained stable.
The world’s second largest economy is expected by many analysts to set a growth target of “around 6 per cent” in 2020, compared with the 6 to 6.5 per cent range for this year.

Given the recent upward revision to the size of China’s economy last year following the completion of the latest economic census, economists believe a growth rate of 5.8 per cent next year will be enough for the government to achieve its overarching goal of creating a “moderately prosperous society” by doubling the size of the economy in the decade to 2020.

“The overall situation is that the global and Chinese economies are going downward. Luckily, China is not the worst and it knows exactly what it should do,” former PBOC adviser Li Yang told Friday’s conference.

Newsletter

Related Articles

0:00
0:00
Close
Macron and his wife to provide 'scientific photographic evidence' that she is a real woman
US Tech Giants Pledge Billions to UK AI Infrastructure Following Starmer's Call
Saudi Arabia cracks down on music ‘lounges’ after conservative backlash
DeepMind and OpenAI Achieve Gold at ‘Coding Olympics’ in AI Milestone
SEC Allows Public Companies to Block Investors from Class-Action Lawsuits
Saudi Arabia Signs ‘Strategic Mutual Defence’ Pact with Pakistan, Marking First Arab State to Gain Indirect Access to Nuclear Strike Capabilities in the Region
Federal Reserve Cuts Rates by Quarter Point and Signals More to Come
Effective and Impressive Generation Z Protest: Images from the Riots in Nepal
European manufacturers against ban on polluting cars: "The industry may collapse"
Sam Altman sells the 'Wedding Estate' in Hawaii for 49 million dollars
Trump: Cancel quarterly company reports and settle for reporting once every six months
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
US Launches New Pilot Program to Accelerate eVTOL Air Taxi Deployment
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
Hong Kong Industry Group Calls for HK$20 Billion Support Fund to Ease Property Market Stress
Joe Biden’s Post-Presidency Speaking Fees Face Weak Demand amid Corporate Reluctance
Charlie Kirk's murder will break the left's hateful cancel tactics
Kash Patel erupts at ‘buffoon’ Sen. Adam Schiff over Russiagate: ‘You are the biggest fraud’
Homeland Security says Emmy speech ‘fanning the flames of hatred’ after Einbinder’s ‘F— ICE’ remark
Charlie Kirk’s Alleged Assassin Tyler Robinson Faces Death Penalty as Charges Formally Announced
Actor, director, environmentalist Robert Redford dies at 89
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
JD Vance Says There Is “No Unity” with Those Who Celebrate Charlie Kirk’s Killing, and he is right!
Trump sues the 'New York Times' for an astronomical sum of 15 billion dollars
Florida Hospital Welcomes Its Largest-Ever Baby: Annan, Nearly Fourteen Pounds at Birth
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
×