People’s Bank of China governor Zhou Xiaochuan warned that the country needs to be vigilant for signs of deflation, Reuters reported.
The central bank chief said policymakers are closely watching slowing global economic growth and declining commodity prices.
Zhou’s comments underline increasing nervousness among policymakers as the economy continues to lose momentum despite a raft of stimulus measures, the report said.
“Inflation in China is also declining. We need to have vigilance if this can go further to reach some sort of deflation or not,” Zhou said at a high-level forum in Boao, Hainan province.
He said the speed with which inflation is slowing is a “little too quick”, though the deceleration is part of China’s ongoing market readjustment and reforms.
Beijing is determined to keep the world’s second-largest economy from taking the path of recession and deflation that has blighted Japan for the past two decades.
The PBoC has cut interest rates twice since November and taken other steps to support growth, but economists believe it will be forced to take more aggressive measures in coming months if prices and the economy weaken further.
Zhou also said China had a “clear direction” for interest rate liberalization, but he said it was difficult to give a clear timetable.
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