China’s Zhu Says Monetary Policy Ineffective, Fiscal Aid Needed

  • G-20 communique will flag need for comprehensive policy steps
  • PBOC vice governor says China’s monetary policy is working

China’s Vice Finance Minister Zhu Guangyao said conventional monetary policy, along with unconventional measures such as bond buying, are no longer proving effective in other economies, as he called for more fiscal policy support for his own economy.

China should have a “more active” fiscal policy to support growth, Zhu said at a briefing in Hangzhou, where Group of 20 leaders are gathering for their Sept. 4-5 summit. The G-20 communique will highlight the need for comprehensive use of monetary, fiscal, structural reform, he said. Zhu described fiscal measures in developed economies as having "come to an end."

Asset purchases known as quantitative easing are unsustainable and negative interest rates adopted by some countries won’t have an impact, Zhu said. Speaking separately, People’s Bank of China Vice Governor Yi Gang, said Friday on the sidelines of the looming G-20 gathering that China’s prudent monetary policy is working and policy makers will maintain ample liquidity.

— With assistance by Keith Zhai, Yinan Zhao, and Penny Peng

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