PBOC officials – Tax cuts more effective stimulus than rate cuts

People’s Bank of China (PBOC) has joined the bandwagon of other central banks asking governments to shoulder more responsibility in supporting the economy.

As per the report in China’s National Business Daily, PBOC officials have said the tax cuts (fiscal stimulus) is more effective way of stimulating the economy than interest rate cuts.

Key points

Firms are caught up in a liquidity trap and are unwilling to invest

Regulators should focus more on fiscal policy adjustment