No Sharp Turns From China’s Potential

In accordance with the development in the pandemic, the economy and society at the current stage, PBOC will be flexible in implementing the intensity, pace and focus of monetary policy, and maintain the growth rates of money supply and [aggregate] social financing to basically match the nominal economic growth rate.

Yeah, I know, a bunch of buzzwords. These particular catchphrases are consistent with the more explicit and forthright explanation Chen’s running mate at the press conference, Sun Guofeng, gave off. As head of the PBOC’s monetary policy department, Sun dryly declared:

Currently, the Chinese economy has returned to its potential output level, corporate credit demand is strong, money and credit have grown reasonably, indicating that the current level of interest rates is appropriate.

Taken together, “no sharp turns” means quite simply that this is what it is; what you see right now is what you’re going to get out of China over the year, and years, ahead. As Chen explained, the PBOC will make adjustments as necessary should conditions warrant, but that focus is to “maintain” not boost, strengthen, and get roaring again.

So far as policymakers are concerned, Q4 represents the finish line rather than merely the first step.

Thus, “returned to its potential output level.” As we’ve been saying consistently since the 19th Party Congress way back in October 2017, it’s wise to take them at their word when it comes to the official position on Chinese economic growth (and, obviously, what officially counts as “potential”).

Even with an economy suffering outright contraction in 2020, huge rescues were certainly talked about but remained conspicuously absent from the data. There had been, at best, a minimal response (see below) and that goes for the PBOC, as well, not that you’d know it from mainstream interpretations derived from deceptive Chinese government descriptions of their relative position when compared to the rest of the world.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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Gary Anderson 2 months ago Contributor's comment

Compared to the rest of the world, China is booming. It isn't great, but is relatively ok.