MNI BRIEF: Room For Further Easing Limited - PBOC's Liu

The economy has less room for further expansionary monetary and fiscal policies as M2 has largely outpaced GDP growth and fiscal pressure from local governments has increased, said Liu Shijin, member of the monetary policy committee at the People’s Bank of China on Sunday at 2023 bund Summit in Shanghai.

Further monetary easing is limited considering M2's steady 11% growth in recent months while GDP has printed lower than 5%, and the interest-rate spread between China and the U.S has widened, Liu said, adding local governments suffered a tight revenue situation after significant tax cut efforts.

An aggressive expansion of macro policy will have increasing side effects and, moreover, the country will miss a chance to implement structural reform, which can also have an immediate stimulus to economic growth.