“We have seen some reversals recently, due to coordinated monetary policy efforts,” said Zhu. “The US is more dovish now, which has taken a lot of pressure off emerging market currencies and stabilisation.”
Emerging markets remain under pressure, but Asia is doing much better than Brazil and Russia, noted Zhu. But in the end, said Zhu, the question is not how quickly China will recover from its slump but how stable policy setters can make the economy, and how committed China is to its reform agenda.
Zhu noted the importance of stabilisation to a recovery. “Policy makers should be aiming for an L, not a V,” explained Zhu. “They need to make sure the economy at least doesn’t continue to de-accelerate faster. So basic stability in order to follow through on reforms is more important than the pace of growth. There are already some signs of demand recovery,” she added.
For example, there is a pickup in infrastructure demand, particularly in the subway and intercity rail networks, said Zhu.
The mechanism for stabilisation is different this time around than in 2009, Zhu continued to explain. They have relied on credit growth in the past, but less so now to boost the economy. This time, they will rely more on measures such as lowering funding cost and fiscal policy.
