“The government has made it very clear that if there’s a need, both fiscal policy and monetary policy can step up. Basically, it will be data-driven,” Huang said. He called the economy’s performance so far this year “reasonably good.”
His view reflects cautious optimism about the trajectory of the world’s second-largest economy as rising trade friction threatens to hurt export, which contributed to almost a third of growth last year. It also offers an explanation for authorities’ decision to hold back on major monetary easing measures this year despite top leaders’ pledge in December to adopt a “moderately loose” monetary policy for the first time since 2010.
Sluggish domestic consumption — which continues to lag the growth of industrial production — adds to China’s economic challenges, but the People’s Bank of China (PBOC) has so far prioritised defending the CNY. The PBOC has also refrained from cutting the reserve requirement ratio for banks in recent months to inject liquidity, a move many analysts had anticipated.
Huang cautioned against weakening the CNY to boost exports, warning the potential damage to investor confidence and capital flows could outweigh trade benefits.
See also: China warns BYD, rivals to self-regulate as price war heats up
“It’s possible that you might not get a lot of exports while you weaken the confidence on investors,” he said, stressing the need to balance impacts across the economy.
The central bank set the CNY's reference rate at 7.1754 per dollar on Wednesday, within the narrow range of 7.1688 to 7.1891 seen this year.
He added that the government is making “very serious” efforts to stimulate consumption through recent policy initiatives, the success of which hinges on boosting household incomes and confidence. Addressing the demand shortfall is crucial for tackling deflation, Huang said.
