China needs more stimulus to boost growth, PBOC paper says

China central bank

China needs to roll out more stimulus to boost economic growth as the recovery isn’t solid and its momentum showed signs of slowing, according to Financial News, a newspaper backed by the central bank.

In a front-page report Tuesday, the newspaper said Beijing should introduce new pro-growth policies at the appropriate time to keep growth within a reasonable range, citing Wen Bin, chief economist at China Minsheng Bank.

Authorities should place more emphasis on expanding domestic demand and stabilizing employment and prices, he said. Those policies, if introduced, could also help further boost the confidence of all parties, Wen was quoted as saying.

The People’s Bank of China, the nation’s central bank, unexpectedly cut its policy interest rates on Monday shortly before key data showed the economy weakened in July due to a worsening property slump and continued coronavirus lockdowns. The youth unemployment rate hit a fresh record of 20%, highlighting the pressure Beijing faces to stimulate growth and maintain stability in the society.

The Securities Times said in a separate report on Tuesday the PBOC’s surprise rate cut may be the first in a series of policies to stabilize growth in the second half of the year.

Besides monetary policies, China should also use more fiscal stimulus to boost domestic demand, according to the report. In addition, more industrial policies and local property market measures are crucial to drive the recovery in production and consumption, it said, adding that Chinese banks are expected to cut the loan prime rates this month following the PBOC’s move on Monday.