Economic revamp: Pan will push financial institutions to keep stable financing channels open through property credit and bonds to help address real estate weakness. — Reuters
BEIJING: China is expected to hit its annual gross domestic product growth target this year, and the country must transform its growth model to pursue high-quality and sustainable expansion, says the country’s central bank governor.
Growth momentum has improved recently with production and consumption recovering steadily and employment and consumer prices remaining stable overall, People’s Bank of China (PBoC) governor Pan Gongsheng said in a speech published on the central bank’s website.
Beijing has set an economic growth target of around 5% for this year.
“Our country’s economy needs a reasonable growth rate, but more importantly, we need to achieve high-quality and sustainable development,” Pan said.
“Transforming the economic growth mode is more important than pursuing a high growth rate.”
The central bank would maintain reasonable credit growth, keep liquidity reasonably ample, and “activate financial resources that have been inefficiently occupied and improve the efficiency of fund utilisation”, Pan said, without elaborating.
Chinese leaders have pledged to allocate more financial resources to support tech innovation, advanced manufacturing and green development.
Monetary policy deliberations would pay closer attention to cross-cyclical and counter-cyclical adjustments, Pan added.
China is scrambling to revive growth after a brief post-Covid-19 bounce faltered amid a protracted property market slump and local government debt risks.
Economic indicators released on Tuesday showed imports unexpectedly swung to growth in October while exports contracted at a quicker pace.
Pan said he would push financial institutions to keep stable financing channels open through property credit and bonds to help address real estate weakness.
The central bank will also provide liquidity support to areas with high debt when necessary, according to Pan.
Pan also said he would strictly control investment in new projects in areas that have high debt burdens.
The central bank would keep the yuan basically stable, prevent the formation of one-sided and self-reinforcing market expectations in the yuan, and reduce risks of the currency overshooting, Pan said.
The yuan has lost more than 5% so far this year, making it one of the worst performing Asian currencies.
Meanwhile, China’s yuan firmed slightly yesterday reflecting pressure on the dollar even though it managed to steady a little as financial markets considered whether US rates have peaked.
Sentiment was also aided by a fresh central bank pledge to guard against risks of the yuan overshooting.
The spot yuan was changing hands at roughly 7.2710 at midday, stronger than the previous late session close, after the PBoC set the midpoint rate steady at 7.17.73. The dollar has been under selling pressure over the past week after the Federal Reserve toned down its hawkish stance at its policy meeting last week, and following a soft US jobs report.
“Our economist sees no more hikes and cuts from the third quarter of next year amid a ‘hold for longer’ stance,” Maybank wrote in note to clients, referring to the US Fed policy. “We continue to look to sell the US dollar on rallies.”
The view was echoed by Hao Hong, economist at GROW Investment Group.
Yuan’s real effective exchange rate “has reached its cyclical lows, and the market is starting to price in four Fed cuts in 2024,” he wrote in a report.
“As such, the historic weakness of the yuan should trough, while the yield gap should narrow. Such normalisation should alleviate the pressure on fund flows and Chinese assets, and spur intermittent market rebounds and rallies.”
The dim outlook for the dollar was also reinforced by a majority of foreign exchange strategists polled by Reuters, with expectations the greenback’s recent weakness will linger for the rest of the year.
Moreover, yuan short sellers were put on notice by fresh warnings from China’s central bank against speculation. — Reuters
