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March 14, 2016

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Home » Business » Economy

China able to meet growth target without forceful monetary moves

Source: Agencies | March 14, 2016, Monday | Print Edition

CHINA can achieve its growth target without aggressive monetary stimulus, central bank governor Zhou Xiaochuan said, while acknowledging numerous “difficulties and challenges” facing the world’s second-largest economy.

“We will keep monetary policy stable and don’t think it is necessary to take excessive monetary stimulus to achieve the (growth) target,” he said at a briefing on Saturday on the sidelines of the National People’s Congress.

He was responding to a question about whether China might be forced to loosen credit controls in order to meet its target.

If the economy performs as expected, Zhou said “there would be no need to have stimulus from monetary policy.”

The government will keep liquidity “reasonably abundant” amid the slowing growth pace of the economy, he said.

“Currently we underline the downward pressures on the economy, which faces a relatively large number of difficulties and challenges,” he said.

The Chinese economy grew at its slowest pace in a quarter century last year and China last week cut its 2016 expansion target to 6.5-7 percent, down from “about 7 percent” previously.

The global market remains concerned over the outlook of China’s economy and analysts have questioned its ability to maintain growth while implementing reforms to shift the economic model to a consumption one rather than government-driven investment and exports.

The People’s Bank of China has cut interest rate six times since late 2014 and also reduced the amount of funds banks must set aside as reserves to boost lending.

Reflecting jitters over the prospects of the Chinese economy, the country has seen a flood of cash leaving in the past few months and its foreign exchange reserves, the world’s largest, continue to decline.

Asked about the declines, Zhou said such outflows were “not strange at all” given that China enjoyed massive inflows for many years.

“There is no need at all to rush to buy US dollars,” he said.

China’s foreign exchange reserves dropped US$28.6 billion to US$3.20 trillion at the end of February from the previous month, after falling US$99.5 billion in January and a record US$108 billion in December.

Zhou tried to dispel fears China might weaken the yuan to boost exports. That concern spread after a surprise introduction in August of a new mechanism to set the yuan’s state-controlled exchange rate led to its value falling against the dollar.

Pointing to China’s US$600 billion global trade surplus last year, Zhou said Chinese exporters are competitive and don’t need artificial support.

“We don’t have to resort to exchange rate measures,” he said.

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