PBOC governor vows more substantial support for economy

China's central bank governor vowed to provide more substantial support to the real economy amid recent improvements in economic indicators, which experts expect to further consolidate the confidence in the country's economic recovery.

Recognizing that positive factors in China's economic performance have risen with social expectations brightening, Pan Gongsheng, governor of the People's Bank of China and head of the State Administration of Foreign Exchange, said the PBOC will provide continuous support to ride the uptick in economic momentum.

Aggregate and structural monetary tools are expected to be better leveraged to expand domestic demand, boost expectations and provide more substantial support for the real economy, Pan said at a two-day meeting of the International Monetary and Financial Committee through Saturday in Marrakech, Morocco.

His remarks came in amid increasing signs of an uptick in China's economic activity, with the official purchasing managers index for the manufacturing sector reaching 50.2 in September, up from 49.7 in August and returning to the expansion territory for the first time in six months. 

Financing activity also picked up in September as the increment in aggregate social financing - the total amount of financing to the real economy - amounted to 4.12 trillion yuan ($563.93 billion), up by 563.8 billion yuan from a year earlier, PBOC data showed on Friday.

The real estate market has shown signs of recovery in many regions, with the implementation of policies such as granting favorable mortgage terms to "first home buyers" based on their property ownership status rather than their mortgage history and lowering the mortgage rates for existing first-time home-buyers.

Experts said Pan's latest remarks have underscored the PBOC's policy stance of continuing to beef up support for economic recovery instead of paring down stimulus amid the recent uptick in economic activity, conducive to solidifying the foundation of the country's economic recovery.

Steven Barnett, senior resident representative of the International Monetary Fund in China, said the country has the scope to boost the economy despite real estate headwinds by reorienting fiscal stimulus to consumer spending and implementing further monetary accommodation given the lack of inflationary pressure.

Freddy Wong, head of Asia-Pacific at Invesco Fixed Income, said the PBOC may further reduce policy benchmarks for interest rates to boost economic recovery, adding that he sees no systemic risks stemming from the liquidity stress among some Chinese real estate developers.

Official data shows that China's financial risks are well under control as the banking sector, which holds more than 90 percent of financial system assets, remains generally robust, with large banks, in particular, retaining high credit ratings.

Pan added that the PBOC has implemented a sound monetary policy in a targeted and forceful manner and enhanced counter-cyclical adjustments, thus effectively addressing risks and challenges at home and abroad.

According to Pan, China will pay more attention to the balance between economic growth and sustainability and will actively promote high-quality, sustainable development while maintaining a reasonable growth rate.

Experts said Pan's words signaled that PBOC may reinforce its emphasis on boosting consumption, innovation, green growth, as well as related new infrastructure going forward, after having used structural tools to support inclusive finance, technological innovation, green development and private enterprises.