Former Central Bank Governor Urges China to Address Rising Deflation Concerns

Former People’s Bank of China (PBoC) governor Yi Gang has urged immediate action to combat deflationary pressures affecting China’s economy, emphasizing the need for policymakers to adopt a more accommodative monetary policy. Speaking at the Bund Summit in Shanghai, Yi described the current economic situation as increasingly concerning, particularly in light of weak domestic demand exacerbated by the pandemic and a struggling property market.

Yi highlighted the importance of reversing the negative GDP deflator, which has been a significant indicator of falling prices in the economy. He called for measures to stimulate both consumption and investment, aiming to restore confidence among households and businesses.

“The goal should be to bring the GDP deflator back into positive territory,” he stated, stressing that this is crucial for dispelling deflation.

The former governor’s comments come amid growing apprehension among economists and officials about the risk of China experiencing prolonged economic stagnation, similar to Japan’s situation following its asset bubble collapse in the 1990s. Yi’s remarks are particularly notable given the Chinese government’s recent efforts to limit public discussions about economic challenges, including deflation.

The Bund Summit, hosted by the China Finance 40 Forum, featured a limited presence of senior government officials, reflecting a broader trend of cautious discourse on sensitive economic issues. Discussions included insights from international figures, such as former U.S. Treasury Secretary Robert Rubin and Nobel laureate Michael Spence, who participated via video link.

Yi call for proactive fiscal measures and a shift in monetary policy calling for the government to address deflation and stimulate growth in the world’s second-largest economy.