Liu Shijin, an adviser to the People’s Bank of China, dismissed comparisons between China's current economic scenario and Japan's stagnation period, often referred to as 'Japanification', at the Financial Street Forum today. Liu refuted fears of a balance sheet recession, a phase when entities prioritize debt clearance over investment or expenditure.
Highlighting the unrealized growth potential within China's low-income demographics and emerging industries, Liu contrasted this with Japan's recession, which was primarily due to a lack of new growth sources. While he supported the continuation of easy monetary and fiscal policies for short-term growth, he stressed that these measures alone are not sufficient for sustained long-term economic development.
In order to stimulate long-term growth, Liu advocated for structural reforms. These include providing equal public services to migrant workers and encouraging entrepreneurship in advanced sectors. He emphasized that such reforms are crucial for tapping into the unrealized growth potential within the country's low-income demographics and emerging industries.
This perspective offers a counter-narrative to concerns about China's economic outlook and provides insight into potential policy directions that could be pursued to ensure sustained economic growth. Liu's comments suggest that while easy monetary and fiscal policies have their place in stimulating short-term growth, structural reforms are necessary for long-term economic stability and development.
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