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Growth stable despite external stress

“FACING significant external headwinds from trade protectionism in some major economies, China has maintained a stable growth in 2019, with main economic indicators kept within an appropriate range,” Governor of the People’s Bank of China Yi Gang said on Saturday.

In a statement at the ministerial meeting of the International Monetary and Financial Committee, the International Monetary Fund’s policy-setting body, the Chinese central bank governor said China’s economic structure has been improving further.

“Continued progress has been made in economic restructuring, aggregate demand and supply are basically in equilibrium, and growth has become more resilient,” Yi said.

“In the first three quarters of the year, China’s GDP grew by 6.2 percent, making an important contribution to global growth,” he said. “Consumption and investment continued to grow steadily despite downward pressures.”

The Chinese central bank governor noted, among other things, the total value of imports and exports of goods in the first three quarters increased by 2.8 percent over the same period of last year.

“The authorities have focused more on the quality of growth, and the economy has become more balanced,” Yi said, adding that domestic consumption has “played an even greater role” in driving growth, with consumption expenditure contributing over 60 percent to GDP growth.

“Facing increased uncertainties and downward pressures, China has stepped up its efforts to improve its economic structure and advance its reform and opening-up agenda,” said the central bank governor.

In 2019, the negative list of foreign investment was shortened further, while market access for agriculture and mining industries was relaxed, he said, noting that “significant progress” has been achieved in the opening up of the financial sector.

Going forward, China will remain firmly committed to all-round opening up, said the central bank governor.

“We will further open up the manufacturing sector, the financial sector and other modern services sectors, take forward the reform of the exchange rate mechanism and the convertibility of the RMB under the capital account in a steady manner, lower overall tariffs voluntarily, further improve relevant laws and regulations, and strengthen intellectual property right protection,” Yi said.

“Efforts in all these areas will create an environment conducive to long-term stability and development,” he said.

China will continue to pursue a prudent monetary policy in light of domestic and external developments, Yi said.

“Since the beginning of the year, the People’s Bank of China has cut the reserve requirement ratio three times to lower the cost of funds for the banks. The market-based interest rate reform has advanced further,” Yi said in the statement. “These policy measures have achieved desired results. Growth of the money supply and credit has been stable, and market interest rates have remained at low levels,” he said.

While attention will be given to “maintaining a stabilized leverage ratio,” counter-cyclical measures will be taken to “align the growth of M2 and total social financing with that of nominal GDP,” said the central bank governor. “The transmission mechanism for monetary policy will be further improved to reduce firms’ funding cost and to promote high-quality economic growth,” he said.

China has maintained a stable growth in 2019, with main economic indicators kept within an appropriate range, despite facing significant external headwinds from trade protectionism in some major economies, according to Yi.

The central bank governor also stressed that the Chinese government “attaches great importance” to preventing and mitigating major financial risks.

“Since the beginning of this year, the authorities have introduced a series of market-based and rules-oriented measures to address the risks of some small- and medium-sized banks,” he said.

The authorities have also taken a number of targeted measures to improve its liquidity management tools, Yi noted.