China Will Sustain Growth Rebound, Central Bank Says

Thanks to its generous stimulus package and growth in loans, China’s financial forecast is generally positive. From Bloomberg:

China will sustain its economic rebound this quarter and growth is likely to top the government’s 8 percent target for 2009, the central bank said.

Policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth, the central bank said in a report on the third-quarter economy, posted on its Web site today.

China’s economic acceleration and faster-than-estimated growth in the U.S. may help to extend this year’s global rally in stocks. Today’s comments contrast with the central bank’s July report, which described the world’s third-biggest economy as being in a “critical” phase and facing many uncertainties.

“The central bank is clearly more confident,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “China’s economic growth will continue to rebound in the coming quarters.”

News on the yuan, from Reuters:

China will continue to pursue currency reforms despite having adopted a special policy to maintain yuan stability to cope with the global financial crisis, central bank governor Zhou Xiaochuan said on Friday.

He added that the yuan should eventually achieve a certain international status, although this would be a gradual process.

China revalued its currency against the dollar in 2005 and allowed it to steadily appreciate until the middle of last year, but then began using its system of daily reference rates to establish a virtual peg against the U.S. currency to help cushion its economy against the impact of the global financial crisis.

“We have decided on a yuan reform path, but at the same time we can take a special approach during times of crisis,” Zhou said in a speech.

The spot yuan rate against the dollar has held steady since July 2008, but growing confidence in the economic recovery has recently stoked expectations that the yuan may soon begin to appreciate once more.

For more recent news on the Chinese economy, see a series by Elizabeth Lynch at China Law & Policy.

October 30, 2009 10:40 PM
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Categories: Economy