China Ex-Finance Minister Says Time to Consider Stimulus Exit: Caixin

China’s ex-finance minister said it’s time to consider withdrawing the monetary stimulus injected into the economy this year and fine-tune fiscal policies as the recovery strengthens, according to a report by Caixin.

“It is time for China to study an orderly exit of loose monetary policies,” Caixin quoted Lou Jiwei, who was finance minister from 2013 to 2016, as saying at the Caixin Summit in Beijing Friday. That doesn’t mean it would be an immediate exit, he added.

The challenge is to carefully manage the pace of the exit, Lou said, given high debt levels in the economy. If liquidity is withdrawn too soon it could trigger debt crises, he said.

On fiscal policy, Lou said stimulus should be maintained at its current pace and be made less expansionary next year. Fiscal policies are usually medium-term and it takes a longer time to exit them compared to monetary policies, he said.

China’s economy has staged a steady recovery, benefiting from a rapid resumption in industrial production and robust exports. With virus cases under control and household income improving, consumption has also started to catch up.

Liu Guoqiang, vice governor of the People’s Bank of China, said last week that policy makers globally are discussing the timing of stimulus withdrawal and that an exit was a “matter of time.”

Lou also said at the Caixin Summit that U.S.-China relations are unlikely to get much better in the near term under a Joe Biden presidency. The U.S.’s curbs on China’s development is inevitable, he said.

©2020 Bloomberg L.P.

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