PBOC Is Sounding Optimistic Again After the G20 Summit - Forex News by FX Leaders

PBOC Is Sounding Optimistic Again After the G20 Summit

Posted Monday, July 1, 2019 by
Skerdian Meta • 2 min read

The sentiment in financial markets and in China has been hurt badly during last year on the back of the trade war and the situation got even worse in Q2 of this year as the trade war escalated again. Chinese officials have tried to play it cool and not give themselves too much, but you could read between the lines that they were worried.

Although, the G20 went much better than most were expecting, especially regarding the trade confrontation between US and China. Now, the comments from Chinese officials sound much more positive. Yi from the People’s Bank of China (PBOC) made a bunch of comments in Finland a while ago, so here are some of those comments:

  • Shrinking labour market supply is one factor in slower growth
  • Increasing environmental standards also hurting growth
  • China labour supply peaked in 2010-2011
  • Growth rate will moderate as economy grows
  • Current account surplus to stay below 1% of GDP
  • Economy is basically driven by domestic demand
  • Consumption is now 2/3 of growth
  • China still has plenty of savings
  • China growth rate is right around 6%
  • Does not want competitive devaluation
  • We still have the policy and try to maintain RMB stability
  • Doesn’t want competitive devaluation of RMB
  • China will continue market-oriented FX reform
  • Interest rates are currently at comfortable level
  • The future PBOC policy will be prudent
  • G20 outcome a little better than expected
  • The roadmap for trade talks is very constructive
  • Shadow banking supports economy
  • PBOC needs to distinguish between good and bad in shadow banking
  • China shadow banking will keep growing, but at lower rate

He is sounding optimistic on growth in particular. Economic growth has slowed down in China in the last year, but if there is a trade agreement between the US and China, then it will likely return to previous levels. Although, we should keep in mind that China has developed considerably in the last few decades and can’t go on expanding by 8-10% forever, so expect the economic boom in China to cool off in the coming decade.

 

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About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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