Reform and appropriate policies can support growth
In the face of the tangible slowdown in national economic growth that began last year, it is necessary for the government to introduce some proactive fiscal and monetary policies to deal with looming deflation.
After witnessing fast growth for decades, the world's second-largest economy can accept its natural deceleration in a moderate manner, but when the growth is far below its potential growth rate, appropriate fiscal and monetary stimulation measures are needed. This requires correcting three misperceptions of the Chinese economy.
The first misperception is to put China's economic growth on the opposite side of its reforms: that the country must accept the inevitable slowing of economic growth as it advances needed reforms. However, the fact is almost all reforms can contribute to economic growth. For example, the substantial reforms the country has launched in the financial sector, which have basically realized a market-based pricing regime for interest rates, removed entry barriers to the financial market, and introduced some financial innovations, have forcibly spurred the development of high-tech enterprises.