© Reuters. People’s Bank of China (PBOC) Deputy Governor Pan Gongsheng speaks next to PBOC Governor Yi Gang at a press conference in Beijing, China March 3, 2023. REUTERS/Florence Lo/File Photo
HONG KONG/BEIJING (Reuters) -China’s central bank governor said on Tuesday that monetary policy will remain accommodative to support the economy, but he urged structural reforms over time to reduce a reliance on infrastructure and property for growth.
Pan Gongsheng told the HKMA-BIS High-Level Conference in Hong Kong that economic momentum in recent months suggested China would achieve its 2023 growth target of around 5%.
“I’m confident that China will enjoy healthy and sustainable growth in 2024 and beyond,” he added.
Pan said he expected consumer inflation to pick up in the coming months as drops in food prices, especially pork, will not be sustained. He also pointed to green shoots in China’s purchasing manager’s index of business activity.
China’s consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened.
The government launched a slew of policy measures this year to shore up a feeble post-pandemic economic recovery impacted by a property sector downturn, local government debt risks, slow global growth and geopolitical tensions.
In October, China unveiled a plan to issue 1 trillion yuan ($139.84 billion) in sovereign bonds by the end of the year, raising the 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%.
The PBOC has also implemented modest interest rate cuts and pumped more cash into the economy in recent months, pledging to sustain policy support.
“Going forward, the PBOC will continue to keep its monetary policy accommodative to provide support to the economy,” Pan said.
“LONG AND DIFFICULT JOURNEY”
Pan said it would be far more important for China to pursue high-quality and sustainable growth.
“The traditional model of relying heavily on infrastructure and real estate might generate higher growth, but would also delay structural adjustment and undermine growth sustainability,” he said.
“The ongoing economic transformation will be a long and difficult journey, but it’s a journey we must take.”
Beijing has been trying to reduce the economy’s reliance on property, channelling more resources into high-tech manufacturing and green industries, but has struggled to boost consumer and investor sentiment.
China still channels more funds into infrastructure projects to drive growth, while the central government spends more to try to contain local government debt risks.
Pan pledged to strengthen global macroeconomic policy dialogue and communication to promote global growth and financial stability and said China will make it easier for foreign financial institutions to do business in the country.
The central bank is committed to supporting Hong Kong’s role as an international financial centre, Pan added.
($1=7.15 yuan)
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