People’s Bank of China expects 6-7 % growth in next few years

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People’s Bank of China (PBOC)  the central bank of China proposed that they are able to keep  their annual economic growth at 6-7 per cent over the next three to five years as they cut the bank interest rates for the sixth time in less than a year. Yi Gang, vice governor of the People’s Bank of China said that  Chinese economy  is “new normal” as even they are in a slower pace for  two decades but its growth is  faster than other major economies in the world.

PBOC also lowered the amount which   the banks must hold as reserves. The monetary policy   of the world’s second-largest economy was aggressive since the 2008/09 financial crisis.Yi added that  China would lower their  reserve requirement ratio(RRR) for banks and  the amount of cash that the money lenders needs  to keep on hand – at a “normal” pace.

PBOC  has also planned to keep interest rates at a reasonable level so as to reduce the corporate debt burden. These interest rate liberalization does not mean that the central bank would reduce regulation of rates.

China will  continue to set a  benchmark in  lending and deposit rates but  these rates will  not restrict its market pricing. The data which was recently released  revealed that the  growth rate in Chinese  economy from  July-to-September quarter  is 6.9 per cent  and has gone below   7 per cent for the first time since the global financial crisis.

Yi noted that the China’s stock market also has fallen sharply since June. It had also made adjustments and Yuan, the Chinese currency was devalued in early August. Their actual intention was to make market reforms but due to the relative big depreciation pressure on the Yuan they have decided to stabilize the Yuan.

The PBOC was planning to leverage their levels in the debt market .China has exceptionally high debt levels, and  the banks was not overly anxious about cutting the level of leverage in the economy.

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