Courtesy of Mish.
I picked the title of this post from the Reuter’s headline story “China needs 7.2 percent GDP growth for employment: premier“.
Curiously the same story now appears under the recycled headline China premier warns against loose money policies, a statement (in isolation) that I would agree with.
Let’s take a look at the details.
China needs to sustain economic growth of 7.2 percent to ensure a stable job market, Premier Li Keqiang said as he warned the government against further expanding already loose money policies.
In one of the few occasions when a top official has specified the minimum level of growth needed for employment, Li said calculations show China’s economy must grow 7.2 percent annually to create 10 million jobs a year.
That would cap the urban unemployment rate at around 4 percent, he said.
“We want to stabilize economic growth because we need to guarantee employment essentially,” Li was quoted by the Workers’ Daily as saying on Monday
Yet even as authorities keep an eye on growth, Li sounded a warning on easy credit supply, which he said had topped 100 trillion yuan ($16.4 trillion) in the world’s second-biggest economy.
“Our outstanding M2 money supply has at the end of March exceeded 100 trillion yuan, and that is already twice the size of our gross domestic product (GDP),” Li was quoting as saying.
“In other words, there is already a lot of money in the ‘pool’; to print more money may lead to inflation.”
Perils of Loose Money
I certainly concur with Li on the perils of loose money, while also pointing out three things.
- China’s monetary policy is among the loosest in the world
- Credit growth is insane
- China is not going to grow at 7.2%
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