2015-03-10

Drop In Imports Reflects Deep Seated Problems

Popular economics blogger Yu Fenghui discusses the latest import data here: 进口大幅下挫反映深层次问题. He questions whether some of the jump in exports might be capital flowing around currency controls, in addition to increased demand from the U.S. The main reason for weak imports is the weak economy:

The main explanation is still not flourishing domestic demand and consumption, indicating that the domestic purchasing power is still weak. China's economy has entered a new normal circumstances, get up domestic consumption, China's economic growth will not ease the downward pressure. Especially in the first two months of imports in February fell dramatically illustrate the grim economic situation in mainland China are being renewed. In fact, just two months of imports in the doldrums, from the second half of last year after the import has been in a weak condition, behind China's economic growth momentum is waning concentrated reflection. Must pay sufficient attention.
He concludes by saying the space for the central bank to operate is very small during an economic downturn. The proper response is fiscal policy. In the current case, he calls for a broad and comprehensive cutting of taxes.

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