Relax money policy, not price control
Latest economic data painting a less-than-rosy growth picture have raised the question if this is the time to switch to an expansive monetary policy from a restrictive one.
The slowdown in export growth in the past months should come as no surprise to anyone who has been following the unfolding story of the US subprime credit crisis, which is threatening to push the US into a recession and drag down global growth. The decline in orders from the US and, to a lesser extent, the EU has dealt a serious blow to many manufacturing enterprises, particularly those in Guangdong province.
These manufacturers, especially those in the private sector, are additionally squeezed by the tightening supply of credit and rising cost of energy and a wide range of industrial materials. In the Pearl River Delta region, for instance, thousands of small- to medium-sized enterprises are reported to have closed.
