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China will likely see positive economic growth for 2020, central bank chief says

He expects macro leverage ratio to stabilise in 2021 and reiterates that monetary policy must strike a balance between stabilising growth and preventing risks

Beijing

CHINA will likely post positive economic growth for the full year and the leverage ratio is expected to stabilise in 2021 after debt climbed in the wake of the coronavirus pandemic, the central bank governor said.

The macro leverage ratio - the percentage of debt in households, non-financial enterprises and governments to total gross domestic product (GDP) - "has increased this year due to the fight against the pandemic," governor Yi Gang said in a speech at the Financial Street Forum in Beijing, according to a statement published Wednesday on the central bank's website.

"It will become more stable after GDP growth picks up next year." The ratio needed to be maintained on "a reasonable track", he added.

Data this week showed GDP rose 4.9 per cent in the third quarter from a year ago, putting China in line to be the only major economy to expand this year after bringing the pandemic under control. At the same time, debt has climbed, reaching 269.2 per cent of GDP last quarter, according to Bloomberg's calculations.

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Mr Yi reiterated that monetary policy must strike a balance between stabilising growth and preventing risks. It should "neither let the market be short of liquidity nor lead to excessive supply", he said.

The governor also repeated recent comments that China wants to implement "normal monetary policy" for as long as possible.

Mr Yi said finance policies should work in tandem with fiscal, industry, employment and technology policies to support President Xi Jinping's goal for a carbon-neutral China by 2060. Mr Xi outlined ambitious goals last month to cut emissions in the world's biggest polluter.

Mr Yi said 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 (PBOC), 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.

The Institute for International Finance (IIF) said in July that China's debt-to-GDP ratio was on track to hit 335 per cent, from nearly 318 per cent in Q1.

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. BLOOMBERG, REUTERS

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