China Still Needs Expansionary Economic Policy
To consolidate its post-pandemic growth momentum in 2021, China should not be in a rush to exit from expansionary fiscal and monetary policy. The government may have to issue more bonds than planned, and the People’s Bank of China may need to implement quantitative easing to facilitate this.
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BEIJING – The Chinese economy grew by 6.5% in the fourth quarter of 2020, providing a strong indication that it has recovered from the COVID-19 shock. The market consensus is that, due to base effects, GDP growth shot up to more than 18% year on year in the first quarter of 2021, and will fall steadily in the remaining three quarters of the year before finally stabilizing.