Chinese authorities announce a fight with deflation and economic recovery

The highest leaders of China announced that in the second half of the year they will focus on regulating chaotic competition between companies and strengthening control over production capacity in key industries to counteract economic risks and fight deflation, “Xinhua agency said on Wednesday.

These decisions were made during the July meeting of the Political Bureau of the Communist Party of China (KPCH), the highest decision -making body.

The authorities declared the continuation of the active fiscal policy and loosely loose monetary policy, although this time there were no reduction in interest rates or mandatory reserve indicators. The issue and use of tax bonds, with an emphasis on the effectiveness of allocation of funds, will be accelerated.

The political office, cited by Xinhua, admitted that “currently the Chinese economy still faces many risks and challenges.” The need for a thorough assessment of the situation and increasing the awareness of potential threats was marked.

The release of the potential of domestic demand and increasing consumption is to be crucial for revival. The authorities will also promote technological innovations to develop new quality generation forces and support competitive industries on the global market.

“The chaotic competition between enterprises must be regulated in accordance with the law and regulations,” it was emphasized in the summary of the political office meeting, adding that “management of production capacity in key industries should be improved.”

In March, the Chinese government set the purpose of GDP growth at about 5 percent. The second economy of the world, however, faces the challenges related to the decline in internal consumption and uncertainty on the real estate market. In the second quarter of this year, according to the National Statistical Office, GDP increased by 5.2 percent, which partly resulted from the stimulation packages introduced by the government.

Despite good data on industrial production and exports, analysts remain cautious, indicating the potential negative effects of the escalation of China's trade war from the USA. Growing commercial tensions and unrealized domestic demand are significant risks for the further stable development of the Chinese economy in the coming months.

From Beijing Krzysztof Pawliszak (PAP)

KRP/ AP/ GOR/