A prominent adviser to China’s central bank has offered a rare critique of the country’s economic policies, urging a shift in focus to stimulate consumer spending and establish a firm inflation target. Huang Yiping, who serves on the People’s Bank of China’s monetary policy committee, made these remarks in a speech earlier this year, which was highlighted in a recent article.
Huang criticized the current economic strategy for prioritizing investment over consumption. He argued that the Chinese economy has entered a new phase where total demand—including consumption, exports, and investment—is weaker than in the past, presenting new challenges for macroeconomic policy.
To address these issues, Huang proposed increasing consumer spending through cash handouts and improved access to urban services for migrant workers. He suggested that these measures could help balance China’s dual-speed economy, which has relied heavily on manufacturing and faced backlash from a global oversupply of exports.
The timing of Huang’s critique is notable, coming after the Communist Party’s recent reform meeting, which left many investors underwhelmed. The Third Plenary Session offered few concrete solutions for the economy’s urgent issues, reinforcing manufacturing as the economic cornerstone amid escalating trade tensions.
Huang’s straightforward evaluation is particularly significant given the heightened sensitivity around public critiques of government policies during a period of economic slowdown. Analysts have been cautioned against discussing terms like “deflation” or expressing overly negative views about the economy. This caution is underscored by the recent social media ban on Hu Xijin, former editor-in-chief of the Global Times, following his controversial commentary on the economic reforms discussed at last month’s plenum.
In his speech, Huang subtly addressed the issue of declining prices without explicitly using the term “deflation.” He advocated for setting a concrete inflation target of 2%-3% for China’s consumer price index, contrasting with the traditional 3% target, which has been viewed more as a ceiling rather than a mandatory goal.
Unlike the U.S. Federal Reserve, which targets a 2% inflation rate to balance employment and price stability, the People’s Bank of China must also manage the stability of the yuan among other objectives. Huang warned that if the economy falls into a low inflation trap, it could have severe repercussions.
Highlighting the persistence of deflationary pressures—extending through the longest streak since 1999—Huang questioned whether China might face a deflationary cycle similar to Japan’s prolonged experience. His speech, which was both critical and constructive, attributed the weakened impact of current measures to “mild” government policies and emerging economic conditions.
Huang also critiqued prevailing views that structural reforms alone can boost productivity and the reluctance to adopt aggressive policies akin to those used by Western nations. He noted that significant stimulus measures in the U.S. and Europe have supported those economies without severe negative consequences.
Returning as a PBOC adviser this year after a previous term from 2015 to 2018, Huang has a history of advocating for lower interest rates and warning about potential international push-back against China’s industrial policies. He emphasized that both the central bank and the Finance Ministry must preserve their policy flexibility, as overly conservative measures could jeopardize long-term economic stability.
Huang highlighted the growing pressure on the financial stability of households, businesses, and local governments, calling for increased central government intervention to stabilize confidence and prevent further economic deterioration.
