Chinese Premier Warns over Money Printing as Deficit Enlarges
Short-term stimulus to prop up economic growth by enlarging fiscal deficits and money supply is not sustainable, Li said.
Chinese Premier Li Keqiang has recently warned that printing more money is likely to push up inflation in the world’s second largest economy as the government’s deficit accumulates fast.
“M2, the broader measure of money supply in our country has exceeded CNY100trillion by the end of March, that is already twice of the GDP,” Li said in a speech at the 16th national congress of the All-China Federation of Trade Unions (ACFTU) on October 21st.
Full transcript of Li’s speech was published Monday on the Workers Daily supervised by the ACFTU.
There’s already too much money in the “pool”, Li said as he warned that hyper-inflation can sabotages markets, and create panic among the public as well.
Short-term stimulus to prop up economic growth by enlarging fiscal deficits and money supply is not sustainable, Li said, adding the government’s deficit has topped 2.1 percent, near the 3 percent EU limit.
The EU’s Growth and Stability Pact rules that deficit of its member states must not exceed 3 percent of GDP. However, many members have consistently substantially in excess of the figure.
Li’s speech marked Beijing’s first official acceptance of the limit.
Li acknowledged that the Chinese economy is facing downside pressures from complicated situations both home and abroad as the country’s GDP growth has slowed to 7.5 percent in the second quarter, compared with the double-digit growth in 2010.
Maintaining GDP is mostly about holding up employment, the premier explained, adding 1.3-1.5 million jobs could be created for every one percent growth in GDP.
“We care about jobs, and that’s why we care about GDP,” the premier noted.
Li suggested the government stick to the current fiscal deficit level without loosening or tightening up money supplies while improving government efficiency and cutting expenses.
The premier also vowed to support the service sector and narrow down the gap between the east and less-developed west.