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China economy

China could maintain 6.9 per cent growth in second half of year, central bank chief says

Economic indicators suggest ‘stabilised and stronger growth’, Zhou Xiaochuan says ahead of the release of third-quarter GDP figures

PUBLISHED : Saturday, 14 October, 2017, 3:44pm
UPDATED : Saturday, 14 October, 2017, 10:13pm

The 6.9 per cent economic growth China recorded in the first six months of the year “may continue in the second half” as a number of indicators suggest “stabilised and stronger growth”, according to the governor of the central bank.

Imports and exports increased rapidly, fiscal income grew and prices have been steady, Zhou Xiaochuan was quoted as saying in a statement released on Saturday on the People’s Bank of China’s website after he attended meetings of global finance chiefs this week in Washington.

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The effects of deleveraging were showing, and China would monitor and prevent risk in shadow banking and real estate, he said.

“Positive progress has been achieved in economic transformation,” the statement said. “China will continue to pursue a proactive fiscal policy and a prudent monetary policy, with a comprehensive set of policies to strengthen areas of weakness.”

Zhou’s comments come before the release of third-quarter gross domestic product figures, which are expected to be released on Thursday.

Economists have forecast a moderation to 6.8 per cent from 6.9 per cent in the second quarter amid government efforts to reduce overcapacity and ease debt risk.

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Stable growth in the world’s second-largest economy gives policymakers additional room to push ahead with reforms. Zhou recently made a fresh call to further open up the financial sector, warning that such an overhaul would become more difficult if the window of opportunity was missed.

According to the figures released on Saturday, Chinese banks extended more loans than expected in September, buoyed by demand from home buyers and companies, even as the government tightened the screws to wean the economy off its years-long addiction to cheap debt.

September loan data indicates that China has continued to give significant credit support for its economy ahead of a key Communist Party congress that opens on October 18.

Both bank lending and total social financing, a broad measure of credit and liquidity, look set to hit another record high this year.

In September, banks extended 1.27 trillion yuan ($193.05 billion) in net new yuan loans, central bank data showed.

Household loans, mostly mortgages, rose to 734.9 billion yuan in September from 663.5 billion yuan in August.

Household loans accounted for 58 percent of total new loans last month, down from 61 percent in August.

Short-term loans soared in the third quarter, increasing by 1.53 trillion yuan, almost three times higher than in the year-ago period, according to calculations by Wen Bin, an economist at Minsheng Bank in Beijing.

“A part of these funds are flowing illicitly to the property market and stock market,” said Wen.

Broad M2 money supply (M2) in September grew 9.2 percent from a year earlier, beating forecasts for an 8.9 percent expansion, as August had.

Chinese authorities are trying to walk a fine line by containing riskier types of financing and slowing an explosive build-up in debt without stunting economic growth.

For the first time this year, banks were required to start reporting off-balance sheet wealth management products to the central bank every quarter to give authorities a better sense of potential risks to the financial system.

But results of their “de-risking” campaign have been mixed.

Regulators appear to have made good inroads into reducing risks in the financial system from interbank and shadow bank lending -- which were arguably China’s most immediate systemic threat -- and they have allowed borrowing costs to creep up.

However, credit growth has remained elevated and there is little evidence that companies are using windfall earnings this year to significantly reduce massive debt burdens.

Bloomberg, Reuters