Chinese economy to rebound in the coming months with stronger policy support despite the negative impact of tight US monetary policy

Posted on May 11, 2022   |  

• The US Federal Reserve increased the target federal funds rate on Wednesday by one-half of 1%, to between 0.75% and 1%, which is the 2nd hike this year and its biggest in 22 years to tamp down the inflation level in the US.
• The decision could reduce global liquidity and put pressure on capital outflows and currency depreciation in many developing economies.
• However, for China, the country's vast domestic economy, large foreign exchange reserves, and a steady trade surplus provide a cushion against the spillover effects of US tightening.
• China has taken a step to stabilize the economy at the meeting of the Political Bureau of the Communist Party of China Central Committee on April 29 to step up macro policy adjustments.
• The central bank pledged on Wednesday to formulate new policy tools at an early date to stabilize economic growth, employment, and price levels.
• The impact of the COVID-19 outbreak is slowly fading with the restoration of supply chain activity, while infrastructure construction has maintained a positive expansion rate in April and helped offset downward economic pressures.