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Economy set to maintain momentum, says BOC

By Jiang Xueqing | China Daily | Updated: 2019-09-26 09:18
[Photo/VCG]

The Chinese economy will stabilize in the fourth quarter of this year, Bank of China Ltd said in a report on Wednesday.

"Looking ahead to the fourth quarter, although the external economic environment will remain complicated and volatile, positive factors promoting smooth Chinese economic performance will increase as the country and the United States have restarted trade talks, and policies to stabilize employment, the financial market, foreign trade, foreign investment, domestic investment and expectations have been implemented continuously and will take further effect," said Fan Ruoying, a researcher at Bank of China's Institute of International Finance.

China launched multiple policy measures to ensure steady consumption growth in the third quarter. These measures will help remove the barriers for consumption and hopefully encourage residents to purchase more products, especially in rural areas, and also encourage green and intelligent information consumption in the fourth quarter, she said.

Consumption growth, excluding automobiles, is expected to remain steady or rebound slightly in the fourth quarter, which in turn will promote stable growth in the retail and wholesale industries, as well as the accommodation and food services sector.

With the continuous consumption upgrade and the rapid development of information consumption, modern services sectors including information transmission and the software and information technology services will maintain a relatively high growth rate and become a growth driver for the service industry, said the report.

Countercyclical monetary policy has also taken effect. Statistics from the People's Bank of China, the central bank, show that the growth of China's broad money supply or M2 remained flat year-on-year at 8.2 percent in August. New yuan loans stood at 12.13 trillion yuan ($1.7 trillion) during the first eight months of this year, about 770 billion yuan more than the same period last year.

Researchers at the State-owned lender have urged policymakers to step up countercyclical regulations as the Chinese economy faces increasing downward pressure.

They suggested that the government should accelerate the appropriation of funds raised via special bonds to support major infrastructure construction projects, speed up the work to set a quota range for new special bonds in 2020, and further implement tax and fee cuts in detail, with a focus on lightening the tax burden of small businesses and manufacturing companies.

The PBOC will hopefully further lower interest rates affected by open market operations and the medium-term lending facility rate to reduce the financing costs for the real economy, the part of the economy that produces goods and services. The central bank is also expected to improve risk compensation mechanisms for financial institutions as they have tightened their risk management standards, the researchers said.

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