China has opted not to print large amounts of money to solve its economic problems, despite facing a massive housing crisis. Instead, the government has proposed a 300 billion Yuan bank loan to rescue the sector, a relatively small amount compared to the outstanding debt. This decision has raised eyebrows, as most countries in similar situations would resort to central bank intervention and money printing to inject liquidity.
According to Law Ka-Chung, an expert in economics, China’s inaction may be attributed to several factors. One reason is the ongoing infighting among the country’s billionaires, who pose a threat to the existing regime. By creating a housing crisis, the wealth of these billionaires would be significantly reduced, mitigating the threat. Another reason is the desire to avoid a prolonged crisis, as policy inaction could lead to a sharper economic downturn, potentially ending the crisis sooner.
However, the most significant reason for China’s reluctance to print money is the fear of hyperinflation and currency collapse. The country has experienced the devastating consequences of excess money creation in the 1940s, leading to a currency collapse and political regime change. The current ruling regime is aware of this history and prefers to avoid repeating it.
While other countries, such as the US and Japan, have implemented money printing policies without experiencing severe consequences, China’s economy is unique, and the risks are higher. In 2009, China experimented with rapid money creation, resulting in inflation and currency depreciation. Recently, the country has faced deflation and currency depreciation due to debt crises and monetary expansion.
To avoid these risks, China has chosen a more cautious approach, opting for a gradual and controlled economic adjustment. While this may lead to a slower economic recovery, it reduces the likelihood of a currency collapse and political instability
