China economists urge Beijing to act fast on local-level debt before low prices vanish
Prominent advisers note importance of central authorities expanding borrowing to fund infrastructure before the current window of subdued inflation closes
Beijing should expand central government borrowing and accelerate local debt restructuring, as China’s relatively low price levels offer a rare window for stronger fiscal support to bolster demand, according to some prominent Chinese economists.
“With oil shocks pushing up prices, and inflationary pressures spreading globally, China currently has the lowest price levels, while prices elsewhere are significantly higher,” said Yu Yongding, a former member of the People’s Bank of China’s Monetary Policy Committee who is now an academician with the Chinese Academy of Social Sciences.
“This window of opportunity cannot be missed,” Yu warned, speaking on Saturday at the Tsinghua PBCSF Chief Economists Forum in Beijing. “Once it is gone, it will not come back. By the time [China’s] inflation picks up and prices rise, it will become much more difficult to pursue expansionary fiscal and monetary policies.”
Additional borrowing could support infrastructure investment, which historically serves as an effective driver of economic growth and creates a positive cycle that eventually boosts consumption, he added.