Mar 25, 2021|

JD Technology Chief Economist: Chinese monetary policy should also look outward


by Kelly Dawson

In a column posted today on the Chinese website of Financial Times,  Dr. Jianguang Shen, JD Technology’s chief economist,  argues that China’s domestic monetary policy should not only carefully consider the balance between risk prevention and stable growth, but also be conscious of the need to balance China’s economy against the United States’ recent economic upturn, encouraging two-way flow and the further internationalization of the RMB.

In 2020 China took the lead in containing the pandemic at home and restored its global economic lead, with strong exports and robust supply chain networks fortifying the Chinese economy during a difficult time, Shen writes.

In contrast, the US faced enormous societal and economic upheaval in 2020, with the dollar index losing 6.7% over the course of the year. However, in 2021, anti-epidemic measures and a rapid vaccination rate have largely brought the pandemic under control, with the US expected to achieve herd immunity in the second half of the year. Additionally, favorable economic data driven by large-scale stimulus policies and a significant upward trend of the US Treasury bond yield driven by rising inflation projections have contributed to the rebound of the dollar index, and may support the sustained strengthening of the dollar in the remainder of 2021.

Now, mainstream US investment banks are forecasting that US economic growth could overtake the official forecast of 6.5%, with some even saying the US could grow as fast as China this year.

In response, China should be conscious that the RMB exchange rate may appreciate in 2021, and should pay close attention to imported inflationary pressure as well as internal and external balance of monetary policy, Shen writes.

(Shen is also an adjunct professor at Fudan University. Before joining JD, Shen was managing director and chief Asia economist of Mizuho Securities. Previously he served as senior economist at the European Central Bank in Frankfurt, where he monitored and analyzed the Chinese and other Asian economies. Shen also held economist and senior economist positions at the IMF, OECD, CICC and Central Bank of Finland. )