China's Liquidity Trap Growing Deep And Wide| MENAFN.COM

Friday, 07 October 2022 03:33 GMT

China's Liquidity Trap Growing Deep And Wide

(MENAFN- Asia Times)

For years, economists debated whether China might go the way of Japan. Though the jury is still out, Beijing is displaying Tokyo-like symptoms in at least one alarming respect: a liquidity trap.

No central bank demonstrates John Maynard Keynes' warning about getting caught in the monetary mud more than the . For 20 years now, the BOJ's wheels have spun faster and faster in a frantic effort to escape deflation.

China doesn't yet face a lost decade. And Asia's biggest economy might very well avoid one altogether. But the People's Bank of China (PBOC) confronts a monetary traction problem just as the economy faces a convergence of headwinds.

With data suggesting a marked economic growth downshift, the PBOC announced a surprise rate cut on August 15. Governor Yi Gang reduced the rate on the PBOC's one-year loans by 10 basis points to 2.75% and trimmed the seven-day reverse repo rate to 2%.

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