The People's Bank of China is unlikely to embark on significant policy easing this year due to the relative ineffectiveness of monetary tools in dealing with oversupply,even though central bank officials will place greater emphasis on boosting price levels and take other steps to address the economic slowdown, a member ofthe PBOC's Monetary Policy Committee told MNI.
While China's economy is likely to meet Beijing's 5% growth targetin 2025, the quarter-by-quarter slowdown in GDP has been concerning,said Huang Yiping,dean ofPeking University's National School of Development.The continued decline in the GDP deflator suggests weaker real growth, which is weighing on household income, corporate profits and investor returns, and warrants high-level policy attention, he said.
The economy failed to live up to Huang's initial expectations in 2025 due to a larger-than-anticipated drag from the property sector and the U.S. administration's reciprocal tariffs against China. While the tariffs have not yet materially reduced China's export growth, their impacton business expectations has been significant,directly affecting corporate investment and hiring decisions, he said.
As the Central Economic Work Conference last month identified the expansion ofdomestic demand as a top priority,stronger policy supportfor consumption is likely,Huang said.
Economic recovery can not rely indefinitely on stimulus, Huang stressed. Compared with aggressive monetary easing,structural and reform-oriented measures would be more effective in addressing over supply,such as by accelerating the expansion of central government debt to counter the deterioration in corporate and household balance sheet,which have been hitby falling house prices, he said.
A comprehensive rescue package for the property sector may be warranted, including directfund support from the central government to stabilise the housing market,he suggested.
"In a context of oversupply,the extent to which measures such as interest rate cuts or liquidity injections can boost consumption and investment demand needs to be assessed," Huang said.A possible deal between China and the U.S. to clarify and agree on tariff levels would also help restore economic confidence, he added.
LOW PRICES
The central bank has listed promoting a "reasonable recovery in prices" as a key task for 2026, which Huang described as a "significant policy adjustment."In the past,while annual CPI targets were set,price growth was not emphasised in practice if inflation did notrise sharply,he said.
Huang argues that CPI growth should be maintained in a 2-3% range to stabilise economic expectations, even though the official target was lowered to "around 2%" last year.
Official data show CPI rose just 0.2% y/y in 2025, unchanged from 2024 and 2023 and the lowest rate since 2009. The GDP deflator has been negative for more than two years, the longest stretch in two decades, while producer prices have remained in contraction for over three years.
The inflation outlook remains uncertain and depends on whether the supply-demand imbalance can be eased, a complex task that can not be solved by one or two simple policy measures, Huang said.
CONSUMPTION
The emphasis of Chinese economy policy on consumption has reached an unprecedented level, placing new demands on the design and implementation of macro economic policy,Huang said. Authorities have long been effective at supporting the supply side, particularly manufacturing investment,butthe capacity to drive employment and consumption is limited, he added.
Policy attention is now shifting toward consumption-oriented sectors such as education, healthcare and elderly care, as well as high-end consumption, which had previously received less supportamid concerns over inequality.
Huang cautioned that consumption stimulus and subsidies tend to have only short-term effects. Sustained consumption growth depends on income gains and confidence. Raising incomes requires shifting more resources toward households and the market,while improving confidence- such as through strengthening the social security system - extends beyond the scope of traditional macro economic policy.
State-owned enterprises could contribute more profits to supportsocial security,including through one-offtransfers of state assets to replenish the social security fund, Huang continued. While China's overall savings rate is high, a key reason for this is the elevated savings ofthe government and SOEs, which control substantial income but generate limited direct consumption, he argued.
