The Chinese economy needs more than a rate cut

In the current economic conditions, Yu Yongding, who served as a consultant to the People's Bank of China in the 2000s, argued that the country's central bank is limited in its policy options. Yu drew attention to the importance of fiscal policies for economic stability.

The People's Bank of China has taken various easing steps in recent weeks, including lowering the benchmark interest rate for the first time in nearly two years.

Growth in the world's second largest economy has slowed in recent months due to the real estate crisis, a decrease in investments, and Covid-19.

Yu noted that public expenditures should be increased to support the economy since loan demand is relatively low and the effects of monetary easing are limited. Yu said, "If there is no decisive change in fiscal policy, the effect of monetary easing will be limited. Because easing may reveal different problems, such as excessive credit flow to low-productivity sectors.

Some economists also hold the same view as Yu Yongding, Australia & New Zealand Banking Group China Strategist Xing Zhaopeng said that China's main problems are caused by supply-related problems and insufficient demand, which cannot be solved by loose monetary policy alone.