To combat this long-established issue, priority has to be given to boosting confidence and stabilizing expectations, while expanding investment, boosting consumption and ultimately stabilizing foreign trade. The Chinese government should also attempt to conduct supply-side reform initiatives, to reduce excess capacity and improve the efficiency of industries -- which will reduce overcapacity. The Chinese government should still pay attention to the possibility of falling into deflation, even if it is slight. Like Keynesian said, "It is better to be roughly right than precisely wrong."Â
Michael Abimanyu Kaeng | Undergraduate Economics Student at the University of Indonesia | Staff of Economic Studies Division at Kanopi FEB UIÂ
Bibliography:
Monetary policy. (2022, May 5). Bank of England. https://www.bankofengland.co.uk/monetary-policy
Monica Miller. (2023, April 18). Covid: China economy rebounds after pandemic measures lifted. BBC News. https://www.bbc.com/news/business-65307471
Nicola Davis. (2023, April 18). China's economy rebounds faster than expected after Covid reopening. the Guardian. https://www.theguardian.com/business/2023/apr/18/chinas-economy-rebounds-faster-than-expected-after-covid-reopening
Tom Westbrook. (2023, March 9). Morning bid: Is China exporting deflation? Reuters. https://www.reuters.com/markets/europe/global-markets-view-europe-2023-03-09/
Why deflation is the Fed's worst nightmare. (2015, May 13). Investopedia. https://www.investopedia.com/articles/investing/051315/what-deflation-and-how-do-central-banks-fight-it.asp
Zhang Chaoyang, & Choi Wing Hung. (2016, February). Economic Review. Bank of China (Hong Kong) Limited. https://www.bochk.com/dam/investment/bocecon/SY2016005(en).pdf
China consumer inflation slowest in a year; producer deflation deepens. (2023, March 8). CNBC. https://www.cnbc.com/2023/03/09/china-consumer-inflation-slowest-in-a-year-producer-deflation-deepens.html
China Deflation Pressure Worsens as Economy Slumps, Survey Shows. (2023, January 10). Bloomberg News. 'https://www.bloomberg.com/news/articles/2023-01-10/china-deflation-pressure-worsens-as-economy-slumps-survey-showsÂ
