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Saturday, February 27, 2016, 12:04

Concerns on China's growth dispelled

By Wu Yiyao in Shanghai

Concerns on China's growth dispelled
Chinese Finance Minister Lou Jiwei (left) talks to People's Bank of China Governor Zhou Xiaochuan during the the G20 Finance Ministers and Central Bank Governors Meeting at the Pudong Shangri-la Hotel in Shanghai, China, Feb 26, 2016. (ROLEX DELA PENA / POOL / POOL / AFP)

China's central bank Governor Zhou Xiaochuan said on Friday that the country still has some monetary policy tools to shore up economic growth, and that the government isn't worried about decreasing foreign exchange reserves.

"Given the current Chinese and global economy, our monetary policy is now prudent and relatively accommodative," Zhou said before the two-day Group of 20 central bankers and finance ministers meeting, which opened on Friday evening in Shanghai.

"China still has some monetary policy (maneuvering) space and multiple policy instruments to address possible downside risks," Zhou said.

The G20 meeting will focus on ensuring full, consistent and timely implementation of post-crisis reforms and will discuss experiences and lessons in the implementation of prudent policy frameworks and tools.

Topics to be discussed also will include green finance, infrastructure investment, anti-terrorist financing and promotion of financial inclusion, according to the G20 agenda.

The Chinese economy grew by 6.9 percent year-on-year last year, the slowest rate since 1990, sparking concerns that growth may continue to dip and contribute to the already worrisome economic woes suffered by developed and emerging economies alike.

China's stock market tumble since early this year and the falling exchange rate of the yuan, whose central parity rate dropped to 6.53 against the US dollar on Friday from about 6.1 in May last year, have further worsened market concerns.

"We will continue to adopt a stable monetary policy," Zhou said. "We will focus on maintaining healthy and stable domestic growth and shifting to a new growth pattern against the backdrop of the new normal of the economy."

Economists have expected the monetary authorities to further cut interest rates and lower banks' reserve requirement ratio to offset the downward pressure. But the benchmark interest rates have remained unchanged since October.

Concerns on China's growth dispelled

Zhou said the quality of China's growth has been improving. Consumption growth contributed 66.4 percent of GDP growth last year, while energy use per unit of GDP dropped by 5.6 percent, showing positive signs of the shift of growth pattern to a consumption-driven model with higher efficiency. He added that China opposed using currency depreciation to make its exports more competitive.

"There is no basis for persistent yuan devaluation," Zhou said.

He also said the recent fluctuations in the yuan's exchange rate had reflected well the country's managed floating exchange rate regime, which is based on market supply and demand with reference to a currency basket. The US dollar remained dominant and had the largest weight in the basket, he said.

Zhou said that he had noticed concerns over the country's declining foreign reserves and capital outflows in recent months. But the decline was normal and consistent with the ongoing economic restructuring that was aimed at achieving a more balanced growth model, he said.

China still has the world's largest foreign exchange reserve, but it dropped to $3.33 trillion by the end of December - the lowest level since late 2011 and $110 billion less than a month ago, according to the central bank.

Zhou said that while the proper level of reserves needed to be further discussed, China is able to cope with possible challenges. "Currently, there's nothing to worry about."

Li Daokui, an economics professor at Tsinghua University and a former member of the central bank's monetary policy committee, was cited by Chinese-language media as saying that foreign reserves this year should not be lower than $3 trillion to stabilize the exchange rate of the yuan.

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