Photo: iStock
The report suggests that current financial support and tax reduction policies should focus on crowding out ineffective and inefficient investments. Photo: iStock

According to Yu Yongding, a former member of the central bank’s Monetary Policy Committee, China’s most pressing issue is to halt the further decline in its economic growth by adopting an expansionary fiscal policy and a moderately loose monetary policy, reported.

Yu believes that without solid economic growth, long-term problems such as structural adjustments and economic system reform could hardly be promoted or pushed forward.

In addition to the growth rate, Yu thinks that China needs to maintain a reasonable inflation rate.

“Currently China’s inflation rate is only about 2%, and the economic growth rate continues to decline,” Yu said. In this case, the central bank should be allowed to adopt an expansionary monetary policy in order to achieve a higher nominal GDP growth.

Yu also fully believes that China has the right conditions to implement an expansionary fiscal policy.

“The ratio of China’s deficit-to-GDP ratio may exceed 3% in the future, and this is not an untouchable level,” Yu said. China should not be limited by the 3% ceiling, Yu stressed.