(Bloomberg) — China’s economic growth will return to its potential level in 2022, though various challenges will require the central bank to maintain a supportive monetary policy stance, Governor Yi Gang said.
“We will keep our accommodative monetary policy flexible and appropriate, and increase support for key areas and weak links in the economy,” Yi said in a videotaped speech Wednesday ahead of a meeting of central bank chiefs and finance ministers from the Group of 20 nations in Jakarta.
Volatile internal and external conditions will create challenges for the economy and require more counter-cyclical policy adjustment, he said.
The People’s Bank of China shifted to easing mode in the second half of last year as economic momentum faltered under a property downturn and sporadic virus outbreaks. The central bank has taken swift action in recent months by cutting interest rates, reducing the amount of cash banks must hold in reserve, and boosting credit expansion in the economy.
While the PBOC held its policy interest rates steady on Tuesday, many economists expect further easing in coming months.
The central bank projects the potential growth rate, or the maximum the economy can expand without fueling inflation, is about 5%-5.7% in the five years through 2025. The objective of monetary policy should be to match actual output with potential, it said in a paper last year.
Economists polled by Bloomberg forecast growth will slow to 5.2% this year after surging to 8.1% in 2021 during the economy’s post-pandemic recovery period.
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PBOC Chief Vows Supportive Policy as Growth Returns to Potential
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