The economic situation was already battered by the crisis unfolding after Brexit, which created a mismatch in the labor market along with inflationary pressures, to which the COVID crisis and the war in Ukraine were later to be added. From a monetary policy perspective, the measures implemented were similar to those in the US and the rest of Europe.
In financial terms, solutions equivalent to the euro area were implemented, deferring tax payments, cutting VAT for tourism and hospitality, and incentives similar to ERTE (Coronavirus Job Retention) for companies that did not lay off their employees. The Bank of England was the first to react to inflationary pressures by raising rates by a symbolic 0.15% in December 2021. It raised the rate of rate hikes during 2022 until the level is 3.5% at the end of the year.
¿Cómo se desactiva la burbuja inmobiliaria? Dejando de robar con el código urbanístico. pic.twitter.com/8uSq5iZ5CE
— Leandro Santoro (@SantoroLeandro) May 15, 2023
The Chinese government also made monetary stimulus, but they were subtle adjustments rather than drastic measures like in other developed countries: rates were 4.3% in 2019 and they fell to 3.65% by the end of 2022. The unconventional monetary policies and fiscal stimulus cannot be compared with the policies adopted by the US and Europe.
China, on the other hand, was affected by very specific factors that isolated it economically from what was happening in the rest of the world:
On the one hand, Xi Jinping’s Covid Zero policy and on the other, due to the bursting of a real estate bubble, which had an impact on the economic development of the Asian giant. The summation of all these particular variables resulted in low structural economic growth, but with an absence of inflation, which allowed the Central Bank of China to implement increasing levels of monetary stimulus in the face of restrictive policies such as the FED, ECB or BOE. Start other central banks.