China will balance need for stabilising growth and preventing risks: central bank governor

[BEIJING] China will strike a balance between stabilising economic growth and preventing risks, even as debt was allowed to temporarily rise this year to support the coronavirus-hit economy, central bank governor Yi Gang said on Wednesday.

Mr Yi told a financial forum in Beijing that he expected China's macro leverage ratio to stabilise next year as the economy expands, after the debt gauge rose in 2020.

Bank lending in the first nine months totalled 16.26 trillion yuan (S$3.31 trillion) as policymakers looked to reboot economic activity, beating a previous peak of 13.63 trillion yuan in the same period last year.

"Monetary policy needs to guard the 'gates' of money supply, and properly smooth out fluctuations in the macro leverage ratio, and keep it on a reasonable track in the long run," Mr Yi said.

Ruan Jianhong, head of the statistics department at the People's Bank of China, said in July that the country's macro leverage ratio jumped 14.5 percentage points in the first quarter and climbed further in the second quarter.

The central bank has not given further details.

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The Institute for International Finance said in July that China's debt-to-gross domestic product (GDP) ratio was on track to hit 335 per cent, from nearly 318 per cent in the first quarter.

At the same forum, Vice-Premier Liu He earlier said the economy will very likely grow this year, adding that prudent monetary policy should be kept appropriate and flexible, and liquidity reasonably ample.

On Monday, China reported GDP grew 0.7 per cent in January to September from a year earlier, versus a contraction of 1.6 per cent in the first half following the outbreak of the novel coronavirus.

On Sunday, Mr Yi said full-year GDP will likely grow by about 2 per cent.

That would make China the only major economy expected to report growth in 2020, though it would be the country's weakest annual expansion since 1976.

REUTERS