China Review News (CRN) recently published an article that discussed the strategy for dealing with the current decline of the Chinese economy. The author suggested that the Chinese government still has three policy tools that it can use: (1) With the decline of the CPI (Consumer Price Index), China has more room to reduce the interest rate; (2) The government can still increase direct investments into the economy, although this may have a negative effect; (3) The central government can temporarily relax the restrictions on local governments’ borrowing power. The article expressed the belief that the government should determine a minimum risk control line which would serve as an indicator of whether or not to use some of these policy tools.
Source: China Review News, July 14, 2012
http://www.zhgpl.com/doc/1021/6/7/2/102167204.html?coluid=53&kindid=0&docid=102167204&mdate=0714062027