Nation to focus on stable growth
PBOC chief’s call for sustainable economic expansion welcomed by experts amid upbeat data
China’s monetary policy will likely remain supportive of economic recovery in 2024 with a focus on nurturing new growth drivers, experts said after China’s central bank governor emphasized the need to pursue sustainable economic growth.
They said aggressive monetary stimulus is unlikely as the country’s price levels are expected to recover amid strengthening economic momentum. Instead, the policy priority would be pursuing steady credit expansion and an optimized lending structure to transition the country’s growth engine from debt-reliant mode to paths that are more sustainable.
Addressing a conference in Hong Kong on Nov 28, Pan Gongsheng, governor of the People’s Bank of China (PBOC), said, “I am confident that China will enjoy healthy and sustainable growth in 2024 and beyond.”
The event was co-hosted by the Hong Kong Monetary Authority and Switzerland-based Bank for International Settlements.
Noting that the Chinese economy is undergoing a growth model transition, Pan said the traditional model of relying heavily on infrastructure and real estate could generate higher growth, but it would delay structural adjustment and undermine growth sustainability.
“High-quality and sustainable growth is far more important. So right now, we should focus more on improving economic structure and forming new growth drivers,” Pan said, adding that plenty of factors will underpin China’s economic prospects, including the country’s innovation ability, big market, good infrastructure, wellestablished industrial chains, and rich, well-educated human resources.
The PBOC’s monetary policy report for the third quarter, published on Nov 27, underscored the rising urgency to accelerate economic transformation due to the diminishing effect of debt on driving growth and the significant change in the supply-demand relationship in the real estate market.
Experts said this indicates that the PBOC will step up efforts to pursue a growth model less reliant on debt by precisely boosting lending to key areas, providing new growth drivers, and making better use of existing loans.
The PBOC report pledged to funnel more financial resources into technological innovation, private and smaller businesses, advanced manufacturing, and green development, and pay more attention to improving the efficiency of existing loans in supporting economic growth.
Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said that given the large size of outstanding renminbi loans, worth more than 230 trillion yuan ($32 trillion), China is more likely to focus on optimizing lending structure to support the real economy than simply pursuing high credit growth.
While the credit expansion of local government financing vehicles and the real estate sector slows, technological innovation and other key areas may receive more financial support, Wang said. “A flood of stimulus measures should be firmly avoided because it could trigger high inflation and financial risks in the future.”
Pan, the PBOC governor, said that China’s inflation will recover as the economy continues to gain momentum. The country’s consumer price index, a main gauge of inflation, is gradually bottoming out, he said, noting that October’s negative CPI growth — down 0.2 percent yearon-year — was mainly attributable to food prices and is unlikely to continue.
Experts said that focusing more on promoting economic transformation does not indicate a change in the overall accommodative stance of the monetary policy, which will continue to provide solid support for economic development next year.
The PBOC report said the central bank will create favorable monetary and financial conditions, promoting steady expansion in money and credit supply, and further encouraging financial institutions to reduce lending interest rates.
Experts said at a forum on Nov 26 that China should consider amplifying macroeconomic support in a precise manner next year to underpin a steady annual economic growth rate of around 5 percent.
Xiao Gang, former chairman of the China Securities Regulatory Commission, said the Chinese economy has seen continuous recovery this year but still faces multiple challenges, ranging from shrinking external demand and insufficient domestic demand to
restrictions imposed by some Western economies on China and the competition from other emerging economies.
To cope with the challenges, it is sensible for China to ramp up proactive fiscal policy and optimize the debt structure as most of the government debt at present is in the form of borrowings by local governments, Xiao said at the annual meeting of the China Macroeconomy Forum, a think tank of the Renmin University of China.
Speaking at the same event, Gao Peiyong, an academician of the Chinese Academy of Social Sciences, said that macroeconomic policies should precisely support the critical links in economic recovery as wideranging, large-scale stimulus have seen a diminishing policy effect and could trigger longer-term pain.
Deepening reform would be of most significance to deal with the prominent problem of weakening market expectations, Gao said.
The remarks come at a time when attention is focused on how the upcoming annual Central Economic Work Conference, which usually takes place in December, will set the tone for economic policy decisions in 2024 after the country’s GDP growth rate touched 5.2 percent year-on-year in the first three quarters.
Yu Ze, deputy dean of the School of Economics at the Renmin University of China and a member of the macroeconomy forum, said that according to the think tank’s forecast, China’s economy will stabilize further in 2024 and register a full-year growth of around 4.8 percent year-on-year, up from an estimated two-year annualized growth rate of 4.1 percent from 2022 to 2023.
Meanwhile, China’s industrial enterprises saw profits rise for a third straight month in October, an official
survey showed on Nov 27, adding to a run of indicators pointing to a stabilizing economy.
Experts expect more such indicators in the current quarter and next year as policymakers have announced a series of measures to stabilize the overall economy, prop up the property sector, and boost market confidence.
Their comments came as National Bureau of Statistics (NBS) data showed on Nov 27 that the profits of major industrial enterprises with annual main business revenue of at least 20 million yuan ($2.8 million) were up 2.7 percent year-on-year in October.
Yu Weining, a statistician at the NBS, attributed the trend of continuous recovery in industrial profits to the steady rebound in industrial production and improved corporate profitability with a series of macroeconomic policies taking effect.
For the January-October period, the profits of major industrial firms fell 7.8 percent year-on-year to 6.12 trillion yuan, narrowing from the 9 percent drop in the first nine months, the bureau said.
In recent months, the country has pledged a series of measures to bolster the economy, including the approval of central government bonds worth 1 trillion yuan, steps to ease the property market, and policies to boost the private sector.
Zhou Maohua, an analyst at China Everbright Bank, said that revenues and profits of industrial enterprises both experienced growth in October, a further sign that policy support is helping the manufacturing sector recover.
The latest economic data showed further signs of improvement in October, with factory output and retail sales growth accelerating, and foreign trade registering year-on-year growth.
Elsewhere, with the JanuarySeptember sales revenue of China’s catering segment growing by nearly 19 percent year-on-year to 3.7 trillion yuan ($517.2 billion), the recovery momentum of the overall consumption sector is expected to continue into the fourth quarter, industry experts said.
Boosted by the incentives from consumption promotion policies, China’s catering market has thrived in the first three quarters.
Peking roast duck chain Quanjude’s third-quarter sales revenue grew 93 percent year-on-year to some 1.1 billion yuan, yielding a net profit of 71.75 million yuan, up 141 percent.
Naixue, a beverage chain listed in Hong Kong, said the number of its outlets increased significantly in the first three quarters on the back of the marketwide recovery, turbo-charging its expansion. In the third quarter alone, Naixue started 166 new direct stores.