China Will Likely See Positive Economic Growth for 2020, PBOC Governor Says
China will likely post positive economic growth for the full year and the leverage ratio is expected to stabilize in 2021.
(Bloomberg) --
China will likely post positive economic growth for the full year and its debt ratio is expected to stabilize in 2021 after climbing in the wake of the coronavirus pandemic, the central bank governor said.
The macro leverage ratio -- the percentage of debt in households, non-financial enterprises and governments to total gross domestic product -- “has increased this year due to the fight against the pandemic,” Governor Yi Gang said in a speech at the Financial Street Forum in Beijing, according to a statement published Wednesday on the central bank’s website. “It will become more stable after GDP growth picks up next year.” The ratio needed to be maintained on “a reasonable track,” he added.
Data this week showed GDP rose 4.9% in the third quarter from a year ago, putting China in line to be the only major economy to expand this year after bringing the pandemic under control. At the same time, debt has climbed, reaching 269.2% of GDP last quarter, according to Bloomberg’s calculations.
Speaking at the same event, Vice Premier Liu He said there’s a “high probability” the economy will post positive growth for the year.
“Reasonably ample liquidity and policy stability should be maintained on the market conditions and growth needs,” Liu said. He added that China will continue to open up its financial system to attract international participation, according to a state media report.
Yi said monetary policy must strike a balance between stabilizing growth and preventing risks, and repeated recent comments that China wants to implement “normal monetary policy” for as long as possible.
Citigroup Inc. economists led by Li-gang Liu said the governor’s comments suggest the policy tone of the People’s Bank of China “has become more hawkish than before” and reduces the chances of an interest rate cut in the fourth quarter.
That could push up the currency further, the economists wrote in a note Thursday.
“If not managed well, China’s high interest rate policy against a backdrop of zero and negative interest rate policy in key global economies has the potential to attract large and persistent capital inflow, which would help push the renminbi to a one-way appreciation path,” they wrote. It could also cause a pile-up of foreign currency debt and asset bubbles, they said.
The currency on Wednesday rose to the strongest since July 2018 even after the central bank set its daily reference rate weaker than expected.
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With assistance from Bloomberg