Quantitative Easing Feasibility Analysis: Based on Chinese Characteristics and Economic Stimulation Models

Abstract

Recent discussions surrounding the People's Daily article on enhancing monetary and fiscal policy coordination, including increased treasury bond purchases, have raised questions about the potential adoption of Quantitative Easing (QE) in China. This paper conducts a feasibility analysis of implementing QE in China, considering the country's unique economic conditions and policy landscape. It argues against the adoption of QE, citing China's historically prudent monetary policy approach and the potential risks associated with large-scale asset purchases. The paper reviews China's approach to economic stimulation, highlighting the importance of monetary and fiscal policy coordination and targeted interventions, including government bond purchases used for specific objectives, rather than broad-based QE. It suggests that China should maintain its focus on conventional monetary policies, enhance existing tools, and prioritize strategies for investment stimulation and consumption boost. The analysis concludes that QE is neither suitable nor necessary for China's current economic context and that a more targeted and sustainable approach to economic stimulation offers a more effective path to long-term economic health. This study contributes to a nuanced understanding of QE's applicability in diverse economic contexts, particularly within a large, centrally planned economy like China's, and provides policymakers with alternative policy recommendations for promoting stable and sustainable growth.