China’s central bank says that the country’s economy is in a far better position to withstand external shocks that could arise from trade disputes with the US, given a decline in its dependence upon overseas trade over the past decade.
At the release of the “China Regional Financial Operation Report (2018)” (中国区域金融运行报告（2018）) last week, People’s Bank of China governor Yi Gang said that said that the central bank has always focused upon the potential impacts of external shocks and made appropriate policy preparations.
“At present China’s economy is fundamentally sound, and the resilience of economic growth is strengthening,” said Yi.
“Overall supply and demand is more balanced, the shift in growth drivers is accelerating, and since the start of the year the renminbi has been one of a small number of currencies to appreciate against the US dollar.
“Based on these economic fundamentals, China’s capital markets have the conditions for healthy growth, and I have full confidence in this.”
Yi Gang further said that internal demand has continually risen as a driver of the Chinese economy, with trade reliance falling from 64% in 2006 to 33% last year, which is less than the global average of 42%.
The current account surplus has fallen from 10% of GDP in 2007 to 1.3% last year, and China’s ability to respond to external shocks has continually improved.
According to the Financial Operation Report the People’s Bank of China (PBOC) is “effectively implementing stable and neutral monetary policy, maintaining rationally ample liquidity, and operating an appropriate monetary and finance environment for supply-side structural reforms and high quality growth.”
PBOC will “continue to improve the macro-prudential policy framework, properly perform macro-prudnetial assessment work,” as well as “fully utilise the structural guidance role of window guidance and loan policy” in order to “firmly guard the baseline against the onset of systemic financial risk.