Senior officials of the ruling Chinese Communist Party have been bandying about a new catchphrase to guide economic policy: a cross-cyclical approach.
While they haven’t bothered explaining what that means here’s an outline (in brief).
Fiscal and monetary policy will become more quickly responsive, taking policy action steps sooner, in smaller steps, all the while with the main eye on longer time frame goals.
Its different to ‘countercyclical policy’ which is adding stimulus when the economy slows and withdrawing it as the economy speeds up. ‘Cross-cyclical’, on the other hand, shifts more pre-emptively, moving sooner and more incrementally.
As the policy becomes more active we’ll get a more nuanced view on what it entails, but for now that’s what we are going on.
Last week the People’s Bank of China kept its LPR rates unchanged for the 16th month in a row. However, under the cross-cyclical approach, any further slowing in the economy will likely see easings ahead. Further cuts to the RRR are a tool in the toolbox, as are LPR cuts.
If I can dig up further analysis of the new approach I’ll post it up.