China’s central bank governor said there was room to further reduce banks’ reserve requirements and vowed to use monetary policy to support consumer prices.
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BEIJING—The heads of China’s central bank and Economic Planning Agency signaled that authorities are ready to take further steps to support growth, but did not announce any major economic stimulus.
People’s Bank of China Governor Ban Gongsheng told reporters on Wednesday that there is scope to further reduce banks’ reserve requirements, which is the amount of cash they need on hand. He also pledged to use monetary policy to “moderately” support consumer prices, according to a CNBC translation of his remarks in Mandarin.
Mr Pan spoke at a press conference on the sidelines of this year’s annual congress with other key leaders of the country’s economic and financial sectors.
Leaders defended China’s growth target of about 5% a year while sticking to a 3% budget deficit.
In the annual government work report released on Tuesday, Premier Li Qiang said the world’s second-largest economy faces a number of economic challenges, including a real estate recession, high levels of local government debt, deflation and weak consumer demand. He promised to transform the economy.
However, the working report fell short of many analysts’ expectations for further stimulus, raising questions about how China could achieve another year of growth of around 5%.
Gross domestic product (GDP) increased by 5.2% in 2023 from a low level in 2022 as China emerged from its strict “zero-coronavirus” policy. China’s consumer prices recorded their biggest decline since 2009 in January, while producer prices have fallen for the 16th straight month, leaving Beijing vulnerable to growing the world’s second-largest economy again. This highlights the depth of the challenges we face.
Still, Mr. Ban said China had ample monetary policy tools at its disposal and vowed to push for lower funding costs in the coming months.
The central bank last lowered banks’ reserve requirements by 50 basis points starting Feb. 5, providing 1 trillion yuan ($139.8 billion) of long-term capital. This was a sharper decline than analysts expected.
promoting growth
Zheng Shanjie, chairman of the country’s economic planning agency, the National Development and Reform Commission, said China would “continue to strengthen its macroeconomic policies” this year.
He pointed out how as China continues to strengthen its macroeconomic policy coordination, this includes fiscal, monetary, employment, industrial and regional policy coordination.
“Of course, it is clear that there are still many difficulties and problems in the process of achieving the expected goals,” Zheng said, according to CNBC’s translation of his remarks in Mandarin.
“The external environment may become more complex and severe,” he said. Domestically, he added, there could be problems with China’s efforts to remove provincial barriers to doing business by creating a “national unified market.”
Zheng also said that there is fierce competition in some industries, production and operation difficulties in some businesses, and risks continue in other areas. He did not mention the property by name.
China’s Commerce Minister Wang Wentao said that this year’s foreign trade is facing a difficult situation.
NDRC Director Zheng said that China’s exports increased by 10% in the January-February period compared to the same period last year, but did not specify whether this was based on Chinese yuan or US dollars. The next trade figures are due to be released on Thursday.
Bonds, Debt, Domestic Demand
Chinese Finance Minister Lan Huo’an said at a press conference that the local debt situation overall is “under control.”
The Ministry has seen a decline in local government debt levels following the Ministry’s efforts last year, and is working on a long-term mechanism to resolve the hidden non-performing loan problem, while at the same time taking various measures to calm down the problem. He said that he is trying to
The “very long-term” special government bonds announced in Tuesday’s government activity report were a rare surprise, the fourth time they have been issued since the 1990s.
NDRC Secretary Zheng told reporters that these bonds will support technological innovation, energy securities and other key areas, which are in line with President Xi Jinping’s “New Productivity Capabilities” specified in the activity report. ”, he said.
He also said policy plans for equipment renewal would help boost consumption in the world’s second-largest economy and create a market worth more than 5 trillion yuan (about $694.5 billion). He said the plan includes items such as home appliances and cars.
China’s economy is being held back by weak consumption as a weak real estate market, debt risks and falling stock markets weigh on confidence.
The Chinese government’s plan for this year ranks increasing domestic demand third among 10 economic priorities, underscoring the seriousness of the problem.
The biggest concern for short-term investors is how focused Chinese policymakers are on securing growth.
“In order to achieve this [target of around 5%]the government work report proposed many important policies,” Huang Shouhong, head of the report drafting team and director of the State Council Research Office, told reporters in Mandarin on Tuesday, with CNBC interpreting. .
“Even if China’s economy encounters unexpected shocks or the international environment experiences unexpected changes in the future, there are still tools in the policy toolbox,” he said.
