The central bank of China, injected 265 billion yuan ($41 billion Cdn) into the country’s money markets Tuesday in a stimulus measure aimed at keeping short-term interest rates low.
It was the second biggest debt purchase ever by the People’s Bank of China and came a week before the government comes out with its latest report on quarterly growth.
Economists expect it will show that growth has slowed for the seventh straight quarter.
But authorities are moving more cautiously than they did after the 2008 crisis, when the huge stimulus that helped China rebound also fueled inflation and a wasteful building boom.
China’s economic renaissance is now in its fourth decade. One of its striking features, in addition to its success, is its constant state of change. The types of goods produced, the degree of dependence on cheap labor, the relative openness of markets and currency, all have changed dramatically in the 33 years or so since Deng Xiaoping first began the reform movement. From most reports, it appears that more changes in the direction of economic openness are currently at hand. The current stimulus measure should provide some easing in keeping the short-term interest rates low.
Why does this progress take place? Could it be that the leaders of China have a vision of the future that entails a continuing opening of the economy? Could it be that the leaders of China have aspirations for the Chinese people that require that they become better off economically? Could it be that the leaders of China believe that China’s future will be built on education, creativity, personal discipline, and hard work? My guess is that the answer to all of those questions is “yes”.
With this week’s stimulus measure it is another sign that the Chinese are committed to have the economy grow at a faster pace than we have seen of recent times. China will no doubt the new top economic power in the world investors must wake up to this and be invested long-term and share in this success story.
Written by Sam A.