China’s Top Banking Regulator Says No Irrigation Stimulus, Deficit Monetisation or Negative Interest Rates


The senior-most official in China’s banking system has flagged fiscal and monetary restraint despite the economic impacts of the COVID-19 pandemic.

In a speech delivered on 18 June at the Lujiazui Forum in Shanghai, Guo Shuqing (郭树清), party secretary of the Chinese central bank and chair of the China Banking and Insurance Regulatory Commission (CBIRC), said that China would not engage in “flood-style stimulus,” and would also avoid deficit monetisation and the use of negative interest rates.

“There is no such thing as free lunch – how can this many central banks turn on the money-printing machine to print endless amounts of money?” said Guo

“Over 2000 years ago both China and Europe had already learnt the lesson of the economic and social crises caused by government forging of metal coinage – need I say more about the multiple disasters met by humanity after the emergence of paper money?”

With regard to stimulus Guo said that “China is truly cherishes normal monetary policy.”

“We will not engage in flood-style irrigation, let alone deficit monetisation or negative interest rates.”

Guo’s remarks arrive just after Premier Li Keqiang also committed to no “irrigation-style stimulus” at the close of the Two Sessions legislative congress at the end of May.

Public debate has recently raged in China’s economic policy circles over whether Beijing should adopt deficit monetisation – which detractors referred to as “money printing” – to help boost the economy in the wake of the COVID-19 pandemic.

In his latest speech at the Lujiazui Forum, Guo said that the next step would be to focus on stabilisation of employment and the protection of enterprises, while also highlighting a range of measures including:

  1. Further encouraging stronger cooperation between banks and government.
  2. Strengthening the role of policy-based finance and counter-cyclical adjustments.
  3. Making better use of the unique risk-prevention role of insurance.
  4. Supporting capital markets in playing a broader and more positive role.
  5. Use of multiple financial instruments to connect and repair global supply chains.

Related stories

Heated De­bate over Deficit Mon­eti­sa­tion Con­tin­ues in Chi­nese Pol­icy Cir­cles

China De­bates Mon­eti­sa­tion of Deficit to Deal with COVID-19’s Eco­nomic Im­pacts

Ex-Fi­nance Min­is­ter Calls for Lift­ing Chi­na’s Deficit-to-GDP Ra­tio to 5.8% to Deal with COVID-19 Im­pacts

Li Ke­qiang Com­mits to no “Ir­ri­ga­tion Stim­u­lus” at Close of Two Ses­sions De­spite COVID-19