PBOC Says Macro-leverage to Remain Stable, China’s Monetary Policy Makes Positive Contribution to Global Growth


The People’s Bank of China (PBOC) has stressed efforts to keep macro-leverage levels under control, as well as the positive impacts of Chinese monetary policy on the global economy.

“In recent years, China’s macro-economic adjustment policies have been vigorous, measured and effective, and the macro-leverage ratio has in general succeeded in ‘making stability the watch word,'” said Chen Yulu (陈雨露), PBOC deputy-governor, at a state press conference held on 23 June.

According to Chen as of the end of 2021 China’s macro-leverage ratio stood at 272.5%, for a rise of 23.9 percentage points compared to the end of 2016, or average annual increases of 4.8 percentage points over the five year period.

China’s GDP has grown by 6% per annum on average for the five year period from 2016 to 2021, while CPI growth has averaged 2%.

“This means that China has used moderate control of macro-leverage ratio growth to support an optimised combination of comparatively high growth, comparatively low inflation and comparatively strong employment. Macro-adjustments have obtained outstanding results.

“Changes in the macro-leverage ratio are a key indicator of macro-adjustment results. In recent years PBOC has continually improved the macro-financial adjustment system, and engaged in innovation and improvement of macro-adjustment methods.

“Under the precondition that overall macro-leverage remains stable, we have vigorously supported the growth of the real economy, and effectively ensured that China’s national economy continues to operate within a rational range.”

Chen said that China had been comparatively restrained in its extension of credit compared to other major economies since the start of the Covid pandemic, which had helped to contain inflationary pressure.

“Since the Covid pandemic, China has used comparatively smaller increases in debt to support the rapid recovery of the economy, and macro-leverage growth has been markedly lower than that of other major economies.

“Since the outbreak of Covid, various countries have generally adopted excessively loose stimulus policies, triggering large-scale rises in macro-leverage ratios.

“As of the end of 2021, the average national leverage ratio as reported by the Bank for International Settlements was 264.4%, for an increase of 18.3 percentage points compared to the end of 2019. For China this figure is 16.5 percentage points.

“This embodies our stance of not engaging in ‘irrigation-style flooding,’ not issuing money excessively and not making overdrafts on future macro-policy.

“While stabilising leverage, China has maintained a lead in terms of economic performance, while inflation has been under control overall.

“From 2020 to 2021, China’s annual economic growth rate was 5.1%, ahead of the US, Japan and the Euro zone by 4.1, 6.6 and 5.7 percentage points respectively.

“Inflation levels are also markedly lower than those of major advanced economies.”

Chen also pointed to the positive impacts of China’s monetary policy settings on global economic growth, after a long-standing focus on the needs of the Chinese economy.

“Looking back over the past ten years, PBOC has steadily implemented a self-focused monetary policy, comprehensively assessing complex and volatile domestic and overseas economic and financial conditions, and making effective use of the dual roles of quantitative and structural adjustments to monetary policy.

“We will ensure that the operation of the national economy remains within a rational range, as well as makes a positive contribution to global economic growth, and becomes a key driver and stabiliser of the global economy.”