Navigating China’s Economic Challenges: A Q&A with Scope Ratings’ Dennis Shen

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RegExp("[?&]notifications=1(&|#|$)");"desktop"===y&&i&&b.test(window.location.search)&&(i.checked=!0)};be("ybar-mod-notification",(function(e){var t={isUH3:"crunch"===e.getConfig().ytheme,notifContainer:document.getElementById("notification-container"),notifBadge:document.getElementById("notif-badge"),notifMenu:document.getElementById("ybarNotificationMenu"),notifMenuOpener:document.querySelector("#ybarNotificationMenu + label"),notifDropdown:document.getElementById("notifDropdownContainer"),tooltipContainer:document.querySelector(".".concat(Vn)),notifLabel:document.querySelector(".".concat($n))};t.notifDropdown&&ro(e,t)}))}()}};]]>Dennis ShenMon, Jul 21, 2025, 6:21 PM 5 min readWhen People’s Bank of China (PBOC) governor Pan Gongsheng outlined plans for a more accommodative monetary policy last September, he sparked a market rally. His decisive stance earned him the nickname of “China’s Greenspan”, a reference to former US Federal Reserve chairman Alan Greenspan, who famously slashed interest rates to stimulate economic growth.Fast forward several months and the PBOC’s capacity to influence market expectations appears to be diminishing as the central bank faces the complex challenge of supporting economic activities through lower borrowing costs while stabilising the yuan to preserve market confidence. These at-times conflicting priorities are testing the central bank’s capacity to maintain the same degree of effectiveness.Would you agree with those who have nick named the PBOC governor China’s Greenspan?Comparisons to Alan Greenspan may be premature. Greenspan presided over the Great Moderation, overseeing comparatively-robust and stable growth and achieving moderate levels of inflation. By contrast, Pan took office in 2023 amid a structural economic slowdown and the longest run of deflationary forces since the 1960s (Figure 1).Figure 1. China faces persistent deflationary forcesChina consumer price inflation rate, % year on yearStraight red lines on graphic designate Scope forecasting for calendar-year average inflation in 2025 and 2026. Source: National/regional statistics bodies, Scope Ratings forecasts.Deflation risk derives from the structural transitions in China’s economic growth model so are not of the PBOC governor’s design. But as the governor brings to China some of the innovations of advanced economy central banks to deal with deflation, including large-scale asset purchases, he has to deliver results that stabilise China’s economy before any comparison with Greenspan can be justified.The governor has delivered some policy easing to support the economy, countering low inflation and pursuing stabilisation of the embattled property sector. But very high and rising levels of public sector and corporate debt have created a real dilemma for the central bank. It cannot set about overly aggressive monetary easing without material concerns about creating asset-price bubbles and excess debt accumulation. If the governor can solve this apparent policy paradox and help pave the economy’s path to lower but better-quality economic growth and stable debt, he might one day have a seat on the pantheon of central bankers.What Are Your Thoughts About China’s Bond Rally?The PBOC is facing a relatively new challenge: increasing evidence of Japanification in the Chinese economy, i.e. very low inflation. Bearing in mind the global inflationary forces in play since 2021, China’s grappling with unusually low inflation highlights the severity of domestic deflationary factors.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P Futures6,361.75 +15.00 (+0.24%)Dow Futures44,838.00 +127.00 (+0.28%)Nasdaq Futures23,245.50 +19.25 (+0.08%)Russell 2000 Futures2,273.60 +12.90 (+0.57%)VIX16.50 -0.15 (-0.90%)Gold3,435.90 -7.80 (-0.23%)PortfolioSign in to access your portfolioSign inTop gainersMEDP Medpace Holdings, Inc. 477.73 +168.85 (+54.67%)IQV IQVIA Holdings Inc. 187.38 +28.42 (+17.88%)DHI D.R. 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