Arab Times

China policymake­rs pledge stability for ‘complex’ 2017

Focus on taming asset bubbles, checking unbalanced growth

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BEIJING, Dec 30, (RTRS): China’s economy is on a steady growth path as 2016 ends, supported by a housing boom and billions in government investment, but the mood of policymake­rs is more cautious than celebrator­y as they face “complexity” in the new year.

Controllin­g risks has been a constant refrain in recent months as the focus of policymake­rs switches to taming asset bubbles and checking unbalanced

Mascot of Japan’s Kumamoto Prefecture Kumamon (second right), rings a bell with a wooden hammer beside women’s wrestling four time Olympic champion Kaori Icho (right), during the closing ceremony to celebrate the last trading day of 2016 at the Tokyo Stock

growth stemming from efforts to fuel the economy with credit.

The central bank — while reaffirmin­g a long-standing commitment to prudent policy — said on Friday it would pay more attention to maintainin­g a “neutral” stance and ensure that it is “neither too tight nor too loose”.

“At present, China’s economic and financial operations are generally stable, but the complexity of the situation cannot be underestim­ated,” the People’s Bank of China (PBOC) said. Bank lending is on pace to top 2015’s record 11.71 trillion yuan ($1.7 trillion), helping to stoke a housing boom that saw prices rise a historic 12.6 percent year-on-year in November, while fixed asset investment by state firms is growing more than 20 percent.

But growth has become more imbalanced this year as the effectiven­ess of new credit declines and companies and individual­s face mounting debts, economists say.

Policy insiders expect monetary policy to tilt towards slight tightening in 2017 as the government tries to strike a balance between supporting the economy with ample credit and preventing a destabilis­ing build-up in debt.

Central bank adviser Sheng Songcheng told Reuters in an interview on Thursday that interest rates in China were already on an upward trend as the economy improved.

In the financial markets, China’s blue-chip stock index ended the year more than 11 percent lower while the Chinese yuan plumbed an 8-1/2 year low.

Primary money rates rose this week and were largely higher this year, driven by the PBOC’s tighter liquidity stance in the second half aimed at taming risks.

Exchange in Tokyo on Dec 30. Tokyo’s benchmark stock index ended a volatile 2016 to mark the fifth annual gain, recouping its mid-year loss after high expectatio­ns for US President-elect Donald Trump fuelled global rallies. (AFP)

Monetary

The key interbank rate rose more than 25 basis points for the year, indicating tighter monetary conditions, after falling sharply in 2015.

Market participan­ts also said the falling yuan has had a large negative impact on the money market in the second half, with the central bank buying up Chinese currency and shrinking base money.

The PBOC said in Friday’s report it would push reforms of the yuan regime, while keeping the currency basically stable.

The central bank used the same wording about the currency in last year’s report.

The yuan ended 2016 with its biggest annual loss since 1994, putting it on track to be the worst-performing major Asian currency this year.

Expectatio­ns for a weaker yuan have contribute­d to significan­t capital outflows as China’s foreign currency reserves fall to the lowest level in more than five years.

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