The Chinese authorities are convinced that the Asian country has the capacity and tools sufficient to ensure the recovery and growth of its economy this year.
The mentioned statement was made by People’s Bank of China governor Pan Gongsheng during a 20-minute speech at the annual Asian Financial Forum in Hong Kong. He also pledged to use supportive monetary instruments and measures to reduce risks in the real estate market and strengthen financial ties between the mainland and Hong Kong.
Moreover, Pan Gongsheng stated that China, faced with persistently low domestic consumption and potential headwinds from the United States President-elect Donald Trump, will consider cutting interest rates and the reserve requirement ratio to ensure sufficient liquidity and to maintain a supportive environment for lending. According to him, Beijing could also adjust and increase fiscal spending.
Pan Gongsheng also stated that China will respond to the world’s expectations with responsibility and courage, continuing to play a key role as an engine of global economic growth.
The People’s Bank of China is the forerunner of the Asian country’s economic stimulus push. The financial institution became the first government agency to take concrete action after Beijing began implementing stimulus measures in September, which are vital for regulating market liquidity, the cost of financing, the internationalization of the yuan, and Hong Kong’s role in the Greater Bay Area and Belt and Road Initiative projects.
Separately, Pan Gongsheng encouraged more high-quality enterprises to list and issue bonds in Hong Kong. Also in this context, there was a call to keep expanding mainland-Hong Kong financial-service connectivity and to broaden two-way interest-rate swaps.
Moreover, Pan Gongsheng stated that the Chinese authorities will seek to further increase the national currency reserves allocated in assets in Hong Kong.
It is worth noting that Hong Kong has long positioned itself as a kind of intermediary for Chinese and foreign businesses, including transactions on the city’s stock exchange.
The market capitalization of mainland China on the Hong Kong main board and the small to medium-sized business board grew by more than 3% last year, accounting for 79.8% of the total.
Speaking about the situation in the mainland real estate market, Pan Gongsheng said that local government special-purpose bonds can be used for acquiring idle land and unsold homes. It is worth noting that in this case, he repeated the statements of the central authorities of China. The head of the central bank of the Asian country also noted that the mentioned use of bonds will accelerate the destocking of the real estate market and help halt the sector’s decline. In this context, he separately underlined that the situation in the Chinese real estate sector is already improving. According to him, the total sales area of commercial housing in 30 major cities in China showed monthly growth for 90 days. On an annual basis, the corresponding indicator has been on an upward trajectory for two months in a row.
The head of the central bank of China also noted that the risks in the Asian country’s real estate market have significantly decreased. Moreover, in the relevant context, he separately underlined that overall market transactions have improved.
Property issues emerged in China in 2020 amid new regulations, which became a kind of response to a series of defaults among real estate developers and falling in home prices. The problems in the mentioned sector and the pressure on the Asian labor market have formed a kind of common negative impact factor that has provoked a decline in consumption in the Chinese economic system.
On Monday, Pan Gongsheng also said that China’s central bank will decisively adjust pro-cyclical behavior and other destructive moves to prevent the risk of overshooting the yuan exchange rate. Separately, he noted that the financial regulator of the Asian country will uphold the crucial role of the market in shaping the exchange rate. According to him, the People’s Bank of China will effectively leverage the exchange rate function as an automatic stabilizer for macroeconomic and international balance of payments adjustments.
As we have reported earlier, China’s Central Bank Halts Bond Buying.
