© Reuters. People’s Bank of China (PBOC) Deputy Governor Pan Gongsheng speaks beside PBOC Governor Yi Gang at an interview in Beijing, China March 3, 2023. REUTERS/Florence Lo/File Photo
HONG KONG/BEIJING (Reuters) -China’s reserve bank governor declared on Tuesday that financial policy will remain supportive to boost the economy, but he urged structural reforms over time to reduce a reliance on infrastructure and property for growth.
Pan Gongsheng addressed the HKMA-BIS High-Level Conference in Hong Kong, stating that economic momentum in recent months indicated China was on track to achieve its 2023 growth target of around 5%.
“I’m optimistic that China will enjoy healthy and sustainable growth in 2024 and beyond,” he added.
Pan said he expected consumer inflation to pick up in the coming months as declines in food prices, particularly pork, will not be sustained. He also pointed to promising signs in China’s purchasing manager’s index of business activity.
China’s consumer prices declined in October, as key measures of domestic demand signaled weakness not seen since the pandemic, while factory-gate deflation deepened.
The government introduced a slew of policy measures this year to fortify a weak post-pandemic economic recovery affected by a property sector slump, local government debt risks, sluggish global growth, and geopolitical tensions.
In October, China announced a plan to issue 1 trillion yuan ($139.84 billion) in sovereign bonds by the end of the year, raising the 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%.
The PBOC has also implemented moderate interest rate cuts and injected more liquidity into the economy in recent months, vowing to sustain policy support.
“Going forward, the PBOC will continue to keep its monetary policy accommodative to provide support to the economy,” Pan said.
“LONG AND DIFFICULT JOURNEY”
Pan stated it would be even more crucial for China to pursue high-quality and sustainable growth.
“The traditional model of relying heavily on infrastructure and real estate may generate higher growth, but would also delay structural transformation and weaken growth sustainability,” he said.
“The ongoing economic transformation will be a long and challenging journey, but it’s a journey we must take.”
Beijing has been trying to reduce the economy’s dependence on property, diverting more resources into advanced manufacturing and green industries, but has struggled to boost consumer and investor sentiment.
China still channels more funds into infrastructure projects to drive growth, while the central government spends more to try to contain local government debt risks.
Pan pledged to enhance international macroeconomic policy dialogue and communication to promote global growth and financial stability and said China will make it easier for foreign banks to do business in the country.
The central bank is committed to supporting Hong Kong’s role as an international financial center, Pan added.
($1=7.15 yuan)
