Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
China’s central bank believed that the maximum rate at which the economy can expand without fueling inflation, known as the potential growth rate, is below 6% in the next five years.
In work paper released Thursday, the People’s Bank of China statistics department in China said growth would be expected at 5% -5.7% in the period covering the government’s latest five-year plan through 2025 That represents an overall “medium to high” growth rate, he said.
Potential output will measure the maximum sustained expansion of gross domestic product without causing inflation. The aim of monetary policy should be to match real output with potential, and monetary policy support to the real economy should be in line with potential GDP expansion, according to the paper.
China the official growth target for 2021 is “above 6%,” although economists predict an expansion well above 8%, partly due to last year’s low base at the time of the pandemic .
The PBOC paper shows that traditional large-scale fiscal and monetary stimulus policy will not be able to build real GDP growth above capacity. Such a stimulus would only lead to inflation and a rapid rise in the debt ratio, posing systemic risks to the economy, he said.
The central bank is trying to reinvigorate the stimulus it pumped into the economy last year, amid concerns about debt collection and risk property bubbles.
At their quarterly meeting this week, the PBOC monetary policy committee reaffirmed its stance on maintaining a flexible and appropriate policy. But, a A statement released on Thursday after the meeting ignored phrases used by the PBOC “without turning a leg” in policy, suggesting that policymakers give themselves more room to be works if needed.
Chen Xi, a revenue analyst based at Pacific Securities, wrote in a note that the language shift may mean that the PBOC takes a more flexible approach to policy making based on the current economic climate.
– With the help of John Liu, and Yujing Liu