Archive for ‘People’s Bank of China (PBOC)’

17/06/2019

Chinese Vice-Premier Liu He says ‘external pressure’ can actually help China’s economy

  • President Xi Jinping’s chief US trade war negotiator did not specifically reference rising tensions with United States during surprise speech in Shanghai
  • Keynote address at Lujiazui financial forum his first public appearance in three weeks since tour of Jiangxi province with Xi
The keynote address by Liu He (second left) at the Lujiazui financial forum in Shanghai on Thursday was his first public appearance in three weeks. Photo: Xinhua
The keynote address by Liu He (second left) at the Lujiazui financial forum in Shanghai on Thursday was his first public appearance in three weeks. Photo: Xinhua
Vice-Premier Liu He believes the “external pressure” now hitting China’s economy was inevitable and could actually boost the country’s innovation and development.
Liu, the top economic aide to President Xi Jinping and chief negotiator in the trade talks with the United States, backed up comments last week from

People’s Bank of China governor Yi Gang

that Beijing has sufficient policy tools to address the risks and challenges to ensure that China’s long-term growth prospects remain sound.

He did not directly mention the US-China trade war in remarks at the Lujiazui financial forum on Thursday, but said that there was ample room in China’s macroeconomic system to support growth and that recent moves by the government to cut taxes and government administrative fees were starting to have a positive impact on the economy.

“We do face some external pressure at the moment, but this is the inevitable test that China’s economic upgrade must experience,” Liu told the forum, which is an annual event organised by the Shanghai government and the People’s Bank of China. “The external pressure will help us improve innovation and self-development, speed up reform and opening up and push forward with high quality growth.”

Liu was critical of economists for focusing solely on monthly economic data that has shown signs of weakness in the Chinese economy, while neglecting positive trends that support long-term growth in the world’s second largest economy.

Chinese employment, consumer prices and the balance of payment remained at “reasonable” levels, he said, although 

China’s consumer price index

did rise to the highest level in 15 months in May, partly because of the rising price of pork and fresh fruit.

“No matter what happens temporarily, China’s long-term growth remains positive, which won’t change,” Liu said. “After the global financial crisis, our financial system has been stable. The rapid growth of debt in the system has been contained.”

The keynote speech, which was Liu’s first public appearance since accompanying Xi on a tour of Jiangxi province three weeks ago, was only confirmed at the last minute having initially been announced as a speech by “a State Council leader”.

The external pressure will help us improve innovation and self-development, speed up reform and opening up and push forward with high quality growthLiu He

In an unusual move, Liu used charts and slides, both in Chinese and English, to address Chinese and foreign bankers and investors as well as other Chinese officials including Banking and Insurance Regulatory Commission chairman Guo Shuqing and People’s Bank of China governor Yi.
It remains to be seen whether Liu will resume trade talks on China’s behalf, with a meeting between 
Xi and US counterpart Donald Trump

at the G20 summit at the end of June yet to be confirmed after negotiations broke down in early May.

“We noticed that the US side had repeatedly expressed the hope that the two presidents could meet during the G20 summit later this month. Right now I have no new information to offer about the China-US trade talk,” said Chinese Ministry of Commerce spokesman Gao Feng during Thursday’s regular press conference.
“Nothing is agreed until everything is agreed.”
Since the last round of talks in Washington, which were attended by Liu, the US has increased tariffs on US$200 billion of Chinese goods from 10 per cent to 25 per cent, while Trump has threatened to impose tariffs on the US$300 billion worth of imports not yet covered by duties.
“The US used state power to suppress Chinese enterprises and generalise the concept of national security. These are the behaviours of distorting the market,” Gao added.
“It was the US who reneged and was dishonest in the trade talks, unilaterally escalated the trade tensions and made the negotiation fall into an impasse.”

Source: SCMP

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10/03/2019

China central bank pledges more policy support as bank lending slides

BEIJING (Reuters) – China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs, following data that showed a sharp drop in February’s bank lending due to seasonal factors.

The central bank is widely expected to ease monetary policy further this year to encourage lending especially to small and private firms vital for growth and job creation.

The central bank’s “prudent” monetary policy will emphasize on counter-cyclical adjustments, said People’s Bank of China (PBOC) Governor Yi Gang, using a phrase that implies the need to fight an economic slowdown.

“The global economy still faces some downward pressure and China faces many risks and challenges in its economy and financial sector,” Yi said at a press conference on the sidelines of the country’s annual meeting of parliament.

There is still some room for the PBOC to cut reserve requirement ratios (RRRs), although the amount of room is less compared with a few years ago, Yi said.

Chinese banks made 885.8 billion yuan ($131.81 billion) in net new yuan loans in February, down sharply from a record 3.23 trillion yuan in January, when several other key credit gauges also picked up modestly in response to the central bank’s policy easing.

Yi said combined January-February new loans and total social financing (TSF), a broad measure of credit and liquidity in the economy, could paint a more accurate picture as they showed a rise of 374.8 billion yuan and 1.05 trillion yuan from a year earlier, respectively.

DEBT DEFAULTS

Analysts say China needs to revive weak credit growth to help head off a sharper economic slowdown this year, but investors are worried about a further jump in corporate debt and the risk to banks as they relax their lending standards.

Corporate bond defaults hit a record last year, while banks’ non-performing loan ratio notched a 10-year high.

Pan Gongsheng, a vice governor at the PBOC, told the same briefing that China will control the amount of bond defaults in 2019, using both legal and market means.

Pan conceded that bond defaults increased last year, but the level of defaults was not high compared with China’s average bad loan ratio.

Premier Li Keqiang told parliament on Tuesday that monetary policy would be “neither too tight nor too loose”. Li also pledged to push for market-based reforms to lower real interest rates.

Chinese policymakers have repeatedly vowed not to open the credit floodgates in an economy already saddled with piles of debt – a legacy of massive stimulus during the global financial crisis in 2008-09 and subsequent downturns.

Sources have told Reuters the central bank is not ready to cut benchmark interest rates just yet, but is likely to cut market-based rates.

Yi said the downward trend in TSF has been initially curbed and broad M2 money supply growth will be more or less in line with nominal gross domestic product growth in 2019, Yi added.

Central bank data showed growth of outstanding TSF, a rough gauge of broad credit conditions, slowed to 10.1 percent in February from January’s 10.4 percent, versus a record low of 9.8 percent in December.

M2 money supply grew 8.0 percent in February from a year earlier, missing forecasts, the central bank data showed. Yi said China’s macro leverage ratio, or the amount of debt relative to GDP, was at 249.4 percent at the end of 2018, a fall of 1.5 percentage points from a year earlier, Yi said.
Analysts note there is a time lag before a jump in lending will translate into growth, suggesting business conditions may get worse before they get better.
Most economists expect a rocky first half before conditions begin to stabilize around mid-year as support measures begin to have a greater impact.
China’s economic growth is expected to cool to around 6.2 percent this year, a 29-year low, according to Reuters polls.
Growth slowed to 6.6 percent last year, with domestic demand curbed by higher borrowing rates and tighter credit conditions and exporters hit by the escalating trade war with the United States.
Source: Reuters
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